Lloyds Banking Group plans to sell corporate and retail real estate loan portfolios to New York-based private equity firms Cerberus Capital Management and Apollo Global Management for an aggregate price of £1.2 billion (€1.4 billion; $2 billion). The London-based financial services group agreed to the sales of the loan pools, which have an aggregate unpaid balance of £1.85 billion, over approximately the past week.
Late last week, Lloyds announced the sale of a portfolio of UK corporate real estate loans to an affiliate of Cerberus European Investments, which itself is an affiliate of Cerberus Capital Management, for £90 million in cash. The sale of the portfolio – which includes gross assets, or a total unpaid balance, of £147 million and generated £1 million in profits in 2012 – is expected to be completed by the end of the year.
The deal is the second loan sale agreement to be executed between Lloyds and Cerberus in approximately a week. On November 29, the bank announced an agreement to sell a corporate real estate portfolio to an affiliate of Cerberus Institutional Partners V, Cerberus’ fifth institutional distressed investment fund, for €1 billion in cash. That deal, which comprised non-core European and Nordic loans with gross assets of £1.1 billion and produced losses of £7 million in 2012 – also is expected to close by year-end.
The most recent Cerberus sale, meanwhile, came a day after Lloyds announced it was selling a pool of non-performing Irish retail mortgages to Tanager Limited, an affiliate of Apollo Global Management, for £257 million in cash. The loan book consisted of £610 million in gross assets and generated £33 million in losses last year. That transaction is slated to be completed during the first half of 2014.
All three transactions are part of Lloyd’s non-core asset reduction program, which has been an ongoing effort by the bank since 2009 to reduce its balance sheet size and become a more streamlined and stable UK-focused institution. The proceeds from the loan sales will be used for general corporate purposes, Lloyds said in its deal announcements.