Lloyds confirms Project Thames sale to Cerberus at £325m

Lloyds Banking Group signed contracts with Cerberus Capital Management over the sale of the UK real estate loan portfolio, Project Thames, in the early hours of the morning ahead of a stock market announcement confirming the sale at £325m.

LBG logo for webIn the statement, Lloyds confirmed that the gross assets of Thames were £527m – with gross assets comprising the total unpaid principal balance (UPB), which CoStar News understands is £495m, plus the mark-to-market swap liabilities.

Based on CoStar News’ understanding that Thames’ UPB is £495m, this implies that the swap liabilities are around £32m.

Cerberus’ discount on the gross assets is 38.3%, which reflects paying just under 62 pence in the pound for Project Thames’ 50 loans, from 30 separate borrowers, secured by around 180 secondary properties throughout the UK.

Cover bids were around £15m to £20m lower, with Apollo Global Management and the joint bid by Kennedy Wilson and Deutsche Bank both thought to have offered in the region of £305m to £310m.

As implied by CoStar News’ report yesterday, Cerberus has established a new special purpose vehicle to house the Project Thames – called Promontoria Thames Limited – which will issue debt in the form of unrated notes, which Nomura, the Japanese investment bank, will acquire.

Nomura, picked by Cerberus ahead of rival offers from Goldman Sachs and Citigroup, is expected to finance at around a 60% loan-to-cost (LTC), which implies a senior notes amounting to £195m.

Cerberus is expected to undertake a rapid business plan for the underlying loan and real estate portfolio of the Project Thames NPL, with the Nomura senior notes expected to amortise fast.

Lloyds also confirmed that Project Thames generated losses of £47m in the year to 31 December 2012. Cerberus and Lloyds are expected to close Project Thames in the final quarter of 2013, the bank confirmed this morning.

Deloitte’s portfolio lead advisory services team is running the Project Thames sales process for Lloyds.

jwallace@costar.co.uk

About CoStar News

Finance Editor, CoStar News
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