PTSB shortlists three bidders for Leinster and Munster loan sales

Permanent TSB has drawn up a shortlist of three bidders for the two portfolios of Irish loans it is seeking to sell.

The Irish Times has learned that Deutsche Bank, Goldman Sachs and Mars Capital Ireland have been shortlisted for the Project Leinster and Project Munster portfolios State-controlled PTSB is seeking to offload.

The portfolios of non-core commercial real estate loans were put up for sale before Christmas. They have a combined face value of about €1.5 billion, with PTSB engaging Morgan Stanley to handle the process.

The level of bids submitted to date is not clear but the bank is not expected to achieve face value on the loans.

Morgan Stanley began approaching potential bidders late last year and opened a data room for interested parties in December. This allowed them to access information about the assets involved in the sale.

The bank is expected to select a winning bid by April.

The Leinster portfolio is thought to comprise loans with a face value of about €1 billion while Munster’s par value is more than €500 million.

Single bidder

The portfolios are for sale separately but PTSB is willing to dispose of the loans to a single bidder if a suitable offer is tabled. This is indicated by the fact that that the same parties have been shortlisted for each of the books.

The portfolios are collateralised mostly on commercial real estate and buy-to-let residential properties in Ireland, with a small percentage of the loans in the UK.

A third tranche of loans, called Connacht, is expected to be put up for sale in the near future. The quality of this book is expected to be lower than in the case of both Leinster and Munster.

This is the latest stage in PTSB’s ongoing deleveraging programme of non-core assets. It is also selling its Capital Home Loans business in the UK, which had gross loans of €7 billion on its books at the end of June 2014. It is understood a handful of bidders are in the mix for this business, which is currently in run-down mode.

In October, it announced the sale of its Springboard subprime mortgages unit to Mars Capital Ireland No 2 Ltd after a process that ran for more than three months. It is understood this transaction has yet to fully close.

Springboard was closed to new business in 2009. The mortgage loan book comprised gross assets of about €468 million, of which €350 million was non-performing.

Balance sheet restructuring

It would be expected the sale of the Leinster and Munster portfolios would be used to further reduce PTSB’s funding requirements in line with the ongoing restructuring of its balance sheet.

It is currently in the process of formulating a plan to plug an €855 million capital deficit identified by the European Central Bank in stress tests last October. This deficit was based on the institution's 2013 accounts.

Various actions already undertaken by the bank have reduced the amount required to about €125 million and it has been engaged in so-called non-deal roadshows to drum up interest from external sources in providing capital in return for an equity stake.

It has been speculated PTSB could raise up to €400 million from external investors in return for a stake of between 30 per cent and 40 per cent. The State owns 99.8 per cent of PTSB and any sale of a stake in the bank would require the approval of Minister for Finance Michael Noonan.

No comment on the was available from PTSB on the portfolio sales.