LLOYDS BANKING Group is to sell about €400 million worth of distressed Irish property loans and is taking a more hands-on role at hotels backing about €1 billion worth of loans advanced by the former Bank of Scotland (Ireland).
A number of offers have already been made for the €400 million of property loans, including bids from two United States hedge funds, Och Ziff and Lone Star. It is not known how much Lloyds will get for the loans, but it is suggested they could sell for a quarter of its value, or slightly more.
The sale of the property loans, which will involve accountants Deloitte, is the latest bid by Lloyds, which has been part-nationalised by the British government, to exit the Irish market.
Meanwhile, Lloyds has appointed hotel management company, BDL to manage hotels backing €1 billion of Lloyds’ loans. The appointment is similar to that undertaken by Lloyds when it brought in Stephen Vernon’s Green Property to manage commercial property assets.
BDL will be the preferred asset manager for hotels when Lloyds puts any or all of the hotels into administration or receivership.
The bank’s intention is to maintain the value of the hotels – which are based in the Republic and in Northern Ireland, and to keep them fully operating.
Receivers appointed to hotels that default on their loans from the bank will have the option to use BDL’s property management services, according to Bloomberg.
One in seven hotels has defaulted on their own, or is in arrears, while prices for them have fallen by up to 60 per cent since the peak of the boom in 2007.
BDL Ireland is part of BDL Management, one of the United Kingdom’s largest hotel management companies, running hotels for the Wyndham group, InterContinental and Best Western.
Lloyds is running down €29 billion of loans advanced by Bank of Scotland (Ireland) after the UK bank said in 2010 it was shutting down the troubled Irish subsidiary, formerly owned by HBOS, and exiting the Irish market.
The UK bank said earlier this year that two-thirds of the Irish loan book had become impaired.
Provisions for bad loans in Ireland fell by 25 per cent last year to £3.19 billion. So far, Lloyds has put aside £10.2 billion to cover loan losses, equivalent to 62 per cent of its Irish loan book, up from more than half on 2010.
In another development, the ratings agency Fitch has expressed concerns about the quality of the underwriting for certain customers at Bank of Scotland (Ireland), notably self-employed borrowers where loans were provided for capital purposes.
Fitch said that it reviewed selected loans at Certus, the Dublin company that is running down Lloyds’ Irish loan book, during a visit to the company last February.
The agency said that Lloyds’ subsidiary, Bank of Scotland, which owns the Irish loan book, was also unable to provide key information about the loans, including the adverse credit history of borrowers.
Fitch was assessing about €6 billion of loans sold on to investors in a securitisation transaction.
