Traditionally the months of June and July are reserved for the offloading of British tennis players from the Wimbledon Championships or the offloading of the England football team from international tournaments.
This year’s addition to that illustrious list seems to be the offloading of commercial property debt.
Days after the announcement that Royal Bank of Scotland’s portfolio of ‘toxic debts’ had been acquired by private equity group Blackstone in a £1.6bn deal, it is now the turn of Lloyds Banking Group. The plc is reportedly looking to sell the loans it acquired when it took over the HBOS banking group in 2009. Around £26bn of the total £78bn loan book is regarded as comprising ‘bad loans’, requiring sale or refinancing.
According to reports, a number of private equity groups have contacted the partly government-owned bank over the past few months to explore options for taking on the debt. Last year Lloyds sold £4bn of property assets, an operation seen as ‘successful’ by analysts, and now, for the first time, it is looking at selling loans as well as property.
New chief executive Antonio Horta-Osorio is said to be focused on making £2bn of savings by 2014, and has already outlined plans for 15,000 redundancies. A programme of placing property companies who have defaulted on their loans into administration and then selling them off is under way, and there is a reported desire to see an acceleration of commercial property sell-offs. Project Flagstaff is one such initiative; it has a mixed sector offering, comprising secondary commercial property across England and Wales. Initially valued at £63m, a price in the mid £50m mark is now anticipated for the 38-strong portfolio, which has a tenant profile that includes 27% government, 9% Sony, 8% LA Leisure and 7% Trillium Property.
The act of aggregating different borrowers to sell in this way is viewed as the first of its kind, and may become a regular format for future packaged commercial property disposals.
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