The trend of banks selling off non-performing loans to repair their balance sheets to private equity firms continues in the UK and Ireland. Major loan sell-offs are underway from the National Asset Management Agency (NAMA) and Ulster Bank.
NAMA is moving forward with Project Maeve, Project Jewell and Project Arrow. These loan portfolios together represent over €2 billion in Irish assets.
Ulster Bank’s Project Finn represents €2.55bn in loans, containing €1.5bn in commercial real estate loans (est. real estate value: €700m), €750m in buy-to-let mortgages (est. real estate value: €400m) and €300m in SME loans. In spite of the high value of these loans, the Project is expected to sell below €1.2bn.
Thousands of borrowers and businesses will be affected by these loan sales. Project Finn alone comprises 290 borrower connections and 1,200 properties in the commercial real estate section as well as around 2,000 separate borrowers in the buy-to-let section.
The challenge for these original borrowers will come after the loan sales have finalised. There are a lot of unknowns at this stage. Where can new finance be sourced given the fractured balance sheets and loss of appetite for commercial property finance from local banks? Will the original borrowers be given adequate time to implement workout strategies?
More questions abound for the local property market and econmony, too. Will there be a lot of product coming to the market immediately and will this cause over supply and depressing market value? Will local businesses whose loans have been sold be put under pressure and be forced to scale back growth plans? Depending on how much uncertainty is created, it could cause what little positivity there has been recently to recede.
It is important to realise that the Private Equity Funds are not Banks. Typically they buy, fix and sell loans to get a high return for their investors. This model is not necessarily conducive to helping the local business community.
As with all dark clouds, however, there is a silver lining for borrowers and businesses that have prepared themselves and are realistic in their expectations. GDP Partnership has been assisting borrowers when dealing with Banks and Private Equity Firms for the last five years.
GDP can successfully secure refinance for borrowers and also lead negotiations to secure favourable terms such as debt write-offs or restructures. If your loan has been sold and you’re looking to explore your options, feel free to get in touch with us today.
By Louis Watters ACA