AIB to sell €675m property loan portfolio

Allied Irish Banks has launched the sale of a €675m property loan portfolio, providing the latest sign that Ireland’s lenders are accelerating their distressed debt disposal programmes.

The bank has appointed Morgan Stanley to run a sale process for the loans, which are mainly secured against Irish offices, and has approached a number of potential buyers during the past week.

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The portfolio, codenamed Project Kildare, is likely to attract interest from private equity and vulture funds, which have been actively buying up distressed property loans during the past year.

It is unclear how big a discount AIB will have to accept on the debt. However, recent sales of loans backed by Irish property have attracted bids below half the original value of the debt.

The sale comes just weeks after Lloyds Banking Group put its own €360m portfolio of Irish real estate loans on the block. It reflects a push by banks to shed the billions of euros of legacy debts built up during Ireland’s property boom.

Ireland’s three main banks – AIB, Bank of Ireland, Irish Life & Permanent – are being forced to shed non-core loans to clean up their balance sheets following a banking crisis that forced the country to accept a €67.5bn bailout from the European Union and International Monetary Fund in November 2010.

Irish commercial property values have collapsed since the start of the financial crisis, falling 65 per cent. Meanwhile, the large overhang of offices and retail sites developed during the property boom have driven rents down by 47 per cent since 2007.

Under the EU-IMF programme the banks must remove €70.4bn of non-core assets from their balance sheets by 2013 to wean themselves off emergency funding provided by the European Central Bank and the Central Bank of Ireland.

AIB, which was nationalised during Ireland’s banking crisis, said in March it had reduced the size of its balance sheet by shedding €12.7bn in non-core assets in 2011.

The bank has a target to shed €20.5bn non-core loans. It is also thought to be considering similar sales of property loans secured against UK and continental European assets.

AIB reported a loss after tax of €2.3bn last year, down from €10.2bn in 2010 at the height of Ireland’s banking crisis. The bank declined to comment.

via ft.com