Lloyds TSB is to auction off a whopping 360 million Euros worth Irish real estate loans, many of which are "impaired". Breaking news of the sale, sources told the press that first round bids were taken by the bank at the end of March.
Lloyds has been aggressive in cleansing its books, having sold £900m worth of UK property loans at the end of last year and 2 Australian portfolios already this year.
According to the source, many bidders have tabled offers, while several including Lone Star, the US private equity group, and a joint venture between TPG and Green Property looked over the deal but declined to enter the bidding process.
The loans are expected to sell for just 25% of their original value. However, the only pressure to sell the loans comes from Lloyds itself as many of the bad Irish loans come from its ill-timed purchase of HBOS just as the market crashed. With no external pressure to sell, experts believe that Lloyds will only sell the loans if a bid is received close to the value that they have already written the loans down to.
Lloyds has been aggressive in writing down its Irish debt. According to the bank impaired loans in Ireland increased by £1.9bn to £16.4bn in 2011, with commercial property loans being worst hit. Some 66% of Lloyds Irish real estate loans are now impaired.
It is hardly surprising that Lloyds has stated its intention to pull out of the Irish market, where property prices have fallen 45% since the peak according to official figures, by up to 60% according to some economists, and continue to fall. Just how strongly Lloyds wants out of the market will likely be a factor in how much of a loss they will take on the loans.
- Thursday 26 April 2012