This week, it was announced that Goldman Sachs and CarVal Investors have won Lloyd's Project Poseidon, paying £827m (€1.18bn) for the commercial property loan portfolio. Project Poisedon was comprised of around 5,000 loans from about 3,500 borrowers, 80% of which were secured by Irish assets, 18% in Northern Ireland.
This trade was Lloyd's Banking Group's last Irish commercial property loan portfolio, and completes the bank's withdrawal from commercial property lending in Ireland. The Group will now have less than £30m of exposure to Irish commercial assets, a minimal amount compared to the exposures the banking group once represented.
This latest sale continues on with the loan sales phenomenon in Ireland. Out of the £2.6bn (€3.7bn) gross assets in Project Poseidon, 88% were impaired. Despite including strong assets like the Lyrath Estate Hotel in Kilkenny and the Regency Hotel in Drumcondra in Dublin, the pre-tax losses on Project Poseidon were £130m in the year to December 2014. In order to clear the losses from their books, they have sold the entire loan for a 68% discount.
2015 has been one of the most active years to date in the Irish loan sales market, with Ulster Bank and NAMA remaining at the forefront. This trend shows no sign of regressing as NAMA's €7.2bn Project Arrow is closing shortly, with first round bids set for mid-August, and the sale expected to conclude by October.
Loan trades allow the banks to clean up their balance sheets, but what do they actually mean for the original borrowers? Very simply, the private equity firms are the new owners of the loans, and they will be looking for a return on their investment over the next 3 to 5 years. With banks reluctant to lend, borrowers will need to find new sources of funding, and very quickly, if they are to remain in control.
GDP Capital is now actively helping borrowers in this position. We have capital partners in place who can give you an opportunity to refinance your facilities away from the new owners of your loans. If your loan has been sold, contact our office today.
Conor Devine MRICS