Lloyds lines up four-strong €2.2bn Project Pittlane NPL shortlist

Lloyds Banking Group has selected two consortia and two standalone individual private equity bids to contest the giant €2.2bn two-part Irish Project Pittlane commercial loan portfolio.

Kennedy Wilson, Deutsche Bank, Och-Ziff and Varde Partners comprise the first of the two consortiums, with the second consortia comprised of CarVal Investors and Pepper Asset Services, CoStar News can reveal.

Lone Star and Apollo Global Management make up the third and fourth individual bids, CoStar News understands.

Project Pittlane is comprised of as many as 700 individual loans, lent by Bank of Scotland in the middle of the last decade to Irish property companies and entrepreneurs.

There is understood to be around 500 properties securing the loans, which also include capex facilities and junior loans, from around 50 different borrowers.

Pittlane itself is the aggregation of two separate sub non-performing loan (NPL) pools, Project Pittsburgh and Project Lane.

Deloitte is handling the sale of Project Pittlane on behalf of Lloyds, which was brought to market at the end of August, as the bank seeks to entirely exit the Irish market.

Lloyds and Deloitte have invited bidders to table offers individually on the combined Pittlane, or just the Pittsburgh or Lane NPL pools.

Project Pittsburgh is thought to have a nominal value of around €350m, while Project Lane has a nominal value of around €1.8bn, with as much of 90% of the loans secured by Irish commercial real estate, while the balance is secured by legacy corporate predecessor Bank of Scotland following Irish clients into the UK.

Given the state of the underlying distressed secondary and tertiary property, the portfolios are expected to trade at the most significant yet for a European real estate NPL, at between 25 to 10 cents in the euro, or an 75% to 90% discount – steeper than the 83% discount which Kennedy Wilson and Deutsche Bank paid for Lloyds’ Project Prince in June, paying just €61m.

Bidders are likely to offer cash for the Pittlane NPLs, given the scale of the discounts and the greater difficulty in securing loan-on-loan financing for Irish-backed loans.

Lloyds’ commercial real estate loan book in Irelands was £9.96bn at 30 June 2012, of which £9.12bn, or 91.6% of loans were impaired, with £6.18bn of provisions taken, reflecting a 67.7% impairment cover ratio of the Irish CRE loan book by the end of the second quarter.

In addition to the natural run-off and enforcement in the Irish portfolio, Lloyds will be able to confirm the de-leveraging of almost a quarter of its outstanding book through project Prince and Pittlane sales.

All parties declined to comment.

jwallace@costar.co.uk

About CoStar News

Finance Editor, CoStar News
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