Permanent TSB bank completes its €2.8bn deleveraging programme

Programme was part of restructuring plan between Government and European Commission

Permanent TSB: the assets consisted of commercial real-estate loans involving a number of borrowers. Photograph: Alan Betson / The Irish Times

Permanent TSB: the assets consisted of commercial real-estate loans involving a number of borrowers. Photograph: Alan Betson / The Irish Times

 

State-owned Permanent TSB bank has completed the final stage of a €2.8 billion deleveraging programme of non-core assets in Ireland with the sale of about €300 million of face value commercial real-estate loans.

This concludes its Irish deleveraging programme, which began in November 2013 and was part of a restructuring plan agreed between the Government and the European Commission as part of its €4 billion bailout from taxpayers following the global financial crash in 2008.

The assets consisted of commercial real-estate loans involving a number of borrowers. They have been sold to a range of specialist funds in single transactions or in small groups of loans.

It is not clear what haircut the bank took on the loan sale but the price achieved is thought to have been higher than the bank had originally provided for.

Declan Dolan, assistant treasurer at Permanent TSB, said the loan sales were another “significant and positive” step for the bank towards normalisation.

“The non-core Ireland deleveraging programme has further strengthened the group’s balance sheet and funding profile,” he said. “Further, it was achieved at a price that we believe maximised stakeholder value and minimised capital loss.”

Portfolio

The deleveraging programme in Ireland had three other main components. In July of last year, PTSB said it had agreed to the sale of a portfolio of non-core Irish-based commercial real-estate loans with a par value of €481 million to Cheldon Property Finance Ltd, an investment vehicle managed by CarVal Investors. This was called the Connacht portfolio.

In March 2015, it agreed the sale of its Leinster and Munster project portfolios. They comprised about €1.5 billion of commercial real-estate loans and were sold for €800 million to Havbell Ltd, an entity funded by Deutsche Bank and funds affiliated with Apollo Global Management.

In October 2014, PTSB sold the Springboard mortgage book, which had a face value of €468 million to Mars Capital, an affiliate of US investment group Oaktree.

Mortgage book

The Irish bank has also off-loaded about half of its buy-to-let UK mortgage book, held by its subsidiary Capital Home Loans. This sale to Cerberus Capital was completed last year.

The remaining near €3.5 billion of this book was to have been sold by the end of June this year under the agreement with the European Commission.

However, the UK’s decision to hold a referendum on its European Union membership and the subsequent Brexit result on June 24th forced PTSB to defer the sale and it is now not clear when this book of loans might be off-loaded.

Having once been a top 10 buy-to-let lender in the UK market, CHL has not written any new business since 2008 and is currently in run-down mode. To minimise its currency risk, PTSB recently put in place long-term, sterling-denominated funding covering the majority of these UK assets.

PTSB, which is 75 per cent State owned, returned to profit for the first time in nine years when it recorded an after-tax surplus of €80 million for the six months to the end of June 2016. This was largely driven by net impairment writebacks of €61 million.