Allied Irish Bank has sold the circa £200m Project River UK non-performing UK airport hotel loan portfolio to Davidson Kempner Capital Management, a New York-based hedge fund, for around £140m, CoStar News can reveal.
Davidson Kempner outbid four separate bidders – Apollo Global Management, Cerberus Capital Management, Och-Ziff and Kohlberg Kravis Roberts (KKR) – which were understood to have priced River between in the low-to-mid 60 pence in the pound range, CoStar News understands.
AIB’s sale at 30% discount reflects a competitive price for a complex loan portfolio, which is comprised of seven separate syndicated positions in wider bank club senior tickets, including significant positions held by Royal Bank of Scotland.
Project River’s complexity is due to the minority position within the wider separate senior syndicate financing deals, with each secured by a long-dated interest rate swap, for which crystallising would erode principal debt recovery in the event of loan default at maturity.
Successful loan restructurings would potentially see Davidson Kempner secure a greater capital recovery than the circa £140m paid, depending on the impact of potential swap breakage costs.
Project River is secured by a portfolio of UK airport hotels owned by Arora Hotels, an independent hotel company founded by Surinder Arora in 1999.
One of Project River’s seven loans is the £165m three-bank financing – including Bank of Ireland Corporate Banking and Abbey National Treasury Services – now trading as Santander of a 33-strong property portfolio.
Davidson Kempner European Partners, the European subsidiary, “pursues a multi-strategy investment approach, investing in strategies including distressed, event-driven and equity long/short, merger arbitrage and convertible/volatility,” according to its website.
Davidson Kempner’s hedge fund manages $16bn worth of assets, as at the end of December 2011 which was a $6bn increase in assets under management on a previously reported $10bn as at the end of January 2010.
In February, AIB sold a €400m syndicated senior loan secured by a portfolio of more than 1,100 Banco Santander bank branches – owned by Sun Capital, Pearl Insurance and Drago Real Estate Partners – throughout Spain to a consortium of separate hedge funds yesterday at 80 cents in the euro.
Last November, the bank pulled the sale of Project Pivot NPL after private equity bidders did not meet the bank’s requested minimum hurdle sale price.
AIB’s annual results for 2012, published in April, which revealed a marked deterioration in the bank’s predominantly Irish and UK €22.25bn property and development loan book.
For the full analysis on AIB’s property and construction loan book, based on its 2012 annual results, please see here.
All parties declined to comment.