Apollo pays £257m for Lloyds Banking Group’s Project Phoenix

Lloyds Banking Group has sold a portfolio of non-performing Irish retail mortgage loans to Apollo Global Management for £257m, reflecting a rare disposal of residential loans.

Screen shot 2013-12-06 at 08.01.24Apollo’s £257m initial all-cash price reflects a 57.8% discount on the £610m gross unpaid balance for the non-performing loan portfolio, dubbed Project Phoenix.

Lloyds said the loan portfolio generated losses of £33m in the year to 31 December 2012.

In a statement to the Stock Market, Lloyds said: “The sale proceeds will be used for general corporate purposes and the transaction, although capital accretive, is not expected to have a material impact on the group, due to existing provisions taken against these assets.”

The transaction is expected to complete in the first half of 2014.

An affiliated entity of Apollo will acquire the portfolio of owner-occupier and buy-to-let Irish mortgages, called Tanager Limited, and reflects the second win in the last week for Apollo, which also won a 135-strong UK secondary property portfolio from Aviva Investors, codenamed Project Moon.

Apollo’s Project Phoenix win is the private equity firm’s first major win from Lloyds industrialised NPL disposal programme since acquiring the Project Lane Irish commercial loan portfolio in November last year.

Lloyds sold Project Lane for £149m or an 89.8% discount on the unpaid £1.49bn, as reported by the bank in sterling terms, which was subsequently financed by Credit Suisse.

Whether or not Apollo managed to secure post-closure financing for a portfolio of non-performing Irish residential loans will be an intriguing test for the returning normality of bank financing markets particularly given the country’s still troubled residential market.

Last Friday, Lloyds offloaded its largest real estate loan portfolio of the year, in the combined sale of projects Bravo and Charlie, two subpools of the €1.5bn Project Hampton, to Cerberus.

Before the year end, Lloyds is expected to select a winner for its circa £190m hotel loan portfolio, Project East, which consists of 38 hotels across 10 loans with a geographic spread of assets throughout the UK.

Three weeks ago, CoStar News reported that the Project East finalists were Deutsche Bank, Bank of America Merrill Lynch, Cerberus Capital Management and Lone Star.

jwallace@costar.co.uk

About CoStar News

Finance Editor, CoStar News
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