Lloyds Banking Group has assembled the €850m predominantly German Project Chamonix non-performing loan portfolio, as the de-leveraging bank continues to utilise NPL portfolio sales as the most effective way to industrialise its legacy commercial real estate lending exit.
Eastdil Secured has been mandated to sell Project Chamonix, despite the French-sounding moniker the latest Lloyds NPL is predominantly German retail-focused, with just one or two French properties.
CoStar News understands that there are around 10 different borrowers securing Project Chamonix’s outstanding €850m debt, which is understood to have a current value of closer to €400m. The majority of the loans are matured, while there is a concentration of value in a small number of loans.
The distressed state of the legacy Bank of Scotland loans is compounded by deterioration of the capex-starved properties with a significant proportion of the underlying 200-plus assets in the small discount supermarkets, food stores and DIY outlets sectors.
These sectors of the retail property market have undergone significant structural change since the original BoS loans were extended, through increased competition of larger competitors, out-of-town shopping centres and the inexorable rise of internet shopping.
There is, therefore, understood to be considerable re-letting risk in the portfolio, and a possible conversion play for some of the properties in Project Chamonix, which also have a concentration of mixed-use assets.
Many of the legacy loans extended by BoS in Project Chamonix will have been alongside equity participations by Uberior Europe, the bank’s discontinued European joint venture subsidiary.
The wider Uberior joint venture business line, named after one of BoS’ Edinburgh offices, is managed entirely separately from Lloyds’ Commercial Real Estate Business Support Unit, but with the equity likely out-of-the money in each loan, the equity interests are thought to be waived.
Lloyds has a £2.2bn in gross wholesale European real estate loan exposure, according to the bank’s last reporting of its position in August’s half year results to the end of June. The combined European commercial and residential exposure was 45% impaired with coverage of 38%.
This Friday is the deadline for final bids for Lloyds nominally-valued £778.6m Project Forth, with finalists Lone Star, Cerberus Capital Management and a joint bid by Kennedy Wilson and Deutsche Bank vying for the Scottish and Northern England-focused NPL.
Project Forth has a portfolio LTV of 189.4% across the, based on a current value of circa 100-strong underlying property portfolio of £411m. The 41 loans were all originated between 2006 and 2011 and are all defaulted, either because they are past maturity or through covenant breaches.
Final bids are expected to price Project Forth at a steeper than 50% discount, CoStar News understands. Morgan Stanley is selling Project Forth.
Two weeks ago, Lloyds agreed the winners of two Irish NPLs: the bank traded the €380m Project Pittsbourgh NPL to CarVal Investors for around €95m, reflecting a circa 75% discount. At the same time, Lloyds also agreed to trade the larger circa €1.8bn (£1.46bn) Project Lane with Apollo Global Management’s Risali Limited for €184m (£149m), reflecting an 89.8% discount
Lloyds is expected to close Pittsbourgh and Lane with CarVal and Apollo, respectively, in the first quarter of next year.
All parties declined to comment.