RBS sells Irish loan book tranche at 80% discount

A subsidiary of US private equity firm Cerberus Capital Management has bought a significant proportion of Royal Bank of Scotland’s remaining Irish property loan portfolio for £1.1bn (€1.38bn), a near 80% discount on the combined gross value of the assets.

In a short stock exchange statement yesterday, RBS said it had reached agreement to sell the portfolio, known as ‘Project Aran’, to “an entity controlled by Cerberus”.

Completion of the sale is expected during the first quarter of 2015 and that the proceeds will be used “for general corporate purposes”.

A spokesperson for Ulster Bank said the deal is “all part of the strategy to reduce risk and strengthen capital position – creating a strong and sustainable bank for the future”.

“This transaction brings RBS/Ulster further down the road on its deleveraging plans, which will likely see it complete the Ulster-related deleveraging by mid-2015, well inside its original plans of end-2016,” said Goodbody Stockbrokers’ banking analyst Eamonn Hughes.

“With Ulster fast hitting its targets, this probably leaves Nama as the largest delivering agent in the market heading into 2015.”

Project Aran does not contain any high-profile buildings, and is not linked to any one developer, but is large, covering around 5,000 properties, or “pieces of collateral”, comprising mostly commercial real estate, 75%-80% of which is located in the Republic.

The carrying value of the loans is around £1bn, while the gross value of the assets amount to around £4.8bn. The portfolio generated a loss of £800m last years, mainly due to impairment provisions attached to it.

“The disposal price represents a discount of 77% relative to the gross value of the assets, though came in essentially in line with the net written down value, so requiring no additional impairments,” said Mr Hughes.

Finance workers’ union IBOA said it would seek an early meeting with Cerberus to discuss arrangements for the transfer of its covered staff who opt to move with the portfolio.

“IBOA is anxious to ensure that the interests of the workers engaged in managing the loan portfolio are protected as far as possible,” said IBOA general secretary, Larry Broderick. “Following intensive engagement with management, we have secured a set of proposals which will provide these staff with various options for the future.

“They will be able to transfer to the acquiring company, regulations, which provide some measure of protection for their terms and conditions of employment. If they prefer, they may opt for voluntary severance in line with the terms previously agreed between IBOA and Ulster Bank management. There may also be some limited opportunities for staff to redeploy elsewhere within Ulster Bank.”

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