AIB has agreed to sell a portfolio of mostly defaulted loans for 400 million euros to a consortium led by US distressed debt group Cerberus and including debt management firm Everyday Finance and London-based investment firm London LCM Partners.
The initial value of the loans in the portfolio, called Project Sycamore, was estimated at more than 700 million euros. Sources said the book included buy-to-let mortgages, land and commercial real estate loans, as well as unsecured personal debt and residential mortgages.
AIB said the sale of the portfolio, where the average loan was in default by about nine years, “substantially resolves” the bank’s legacy, long-term non-performing exposures (NPEs), a term the bank uses. instead of non-performing loans.
The bank said the deal would reduce its NPE ratio to 4.4%, the lowest among the three remaining Irish banks, from 5.1% at the end of March. He added that he remained “firmly on track” to achieve his goal of reducing the ratio to around 3% by the end of next year. This will be facilitated by the bank’s planned purchase of €9.9bn of performing tracker mortgages and corporate and commercial loans from Ulster Bank, the latter being the market leader.
“The agreement of this transaction is a significant milestone for AIB as it reduces the NPE ratio to well below 5%,” Chief Executive Colin Hunt said. “This demonstrates further progress as we move towards closing legacy items this year while maintaining momentum in implementing our strategy.”
The composition of the consortium is different from that described by sources earlier this month. They had said Cerberus had teamed up with rival CarVal and debt collection company Cabot to bid for the portfolio.
Sycamore Project Loans recorded a pre-tax loss of 46 million euros last year, including the impact of loan loss provisions taken in the period as the bank prepared the portfolio for sale.
After the sale, all customers in the loan portfolio will continue to enjoy the same regulatory protections, including protections under the Consumer Protection Code and the Code of Conduct on mortgage arrears, AIB said. Loans will be sold with the benefit of existing protections under customer loan agreements. Everyday Finance, as a regulated lending services company, will be responsible for the day-to-day management of the loans.
AIB will have reduced its non-performing loans from a peak of around €31 billion in 2013 to €2.6 billion following the latest loan sale. While most of the reduction was the result of restructuring bank loans from customers willing to work with it, the bank has resorted to portfolio sales in recent years to accelerate the resolution of more problems. problem loans.