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RBS to divest $2.5bn worth real estate loans in Ireland

BBR Staff Writer Published 08 December 2015

Royal Bank of Scotland (RBS) has agreed to divest $2.5bn worth of real estate loans in Ireland to Cairn Homes and Lone Star Funds.


The sale is in line with the bank's strategy to strengthen its capital position and reduce higher risk exposures. The sale proceeds will be used for general corporate purposes.

RBS' Irish subsidiary Ulster Bank will receive £360m for the loan portfolio, known as Project Clear, that is being sold.

The loans had a carrying value of about £115m at the end of 2014, and generated a loss of about £28m on gross assets of £1.63bn.

Separately, Cairn Homes has valued the entire portfolio at €503m. The Irish homebuilder said it will contribute €378m for its share of the portfolio.

The loans are attached to 1,694 acres, including 31 residential development sites.

Cairn CEO Michael Stanley said: "This transaction will unlock the most significant land bank available in Ireland. Cairn's share of the portfolio will provide the opportunity to build over 14,000 new homes, with an expected net development value of in excess of €2bn."

Meanwhile, RBS has inked agreements with three separate investment partners including AIG Asset Management (Europe) Ltd (AIG), Hermes Investment Management (Hermes) and M&G Investments (M&G).

The bank, along with the investment firms, will be able to lend up to £100m in a single transaction to mid-sized companies that are backed by private equity firms.

RBS financial sponsors head Richard Roach said: "RBS has been a consistent lender to private equity-backed UK mid-market corporates for more than 20 years and these new co-lending agreements will make a real and unique difference in this important market.

"It makes borrowing on this scale simpler for our customers and our ability to structure competitive lending packages in this way enables us to support our private equity clients and in turn continue to help UK companies expand, create more jobs and invest more in the British economy."

Image: Royal Bank of Scotland offers personal and business banking, private banking, insurance and corporate finance. Photo: courtesy of Man vyi / Wikimedia Commons.