Whilst UK banks remain awash with loans made against sub-prime property – a legacy of irresponsible lending during the years leading up to the 2007 financial crisis. The UK’s largest commercial property market lender, Lloyds has been particularly active in trying to reduce its exposure to the volatile sector.
Lloyds Banking Group has been considering bids by dozens of private equity groups, opportunistic buyers and pension funds following the launch of distressed real estate loans three weeks ago.
The banking group now seem set to accept a loss of about 35% on up to £1Billion of commercial property debt as it continues to negotiate with up to four remaining bidders for the portfolio.
Initial bids for the distressed portfolio of loans were tabled at almost £650 Million (GBP) or $1 Billion, a price that would represent a 35% discount to the loans’ face value.
Lloyds hope that accelerating the process could mean that the sale could take place before Christmas this year.
The sale of a portfolio of loans marks a step change in Lloyds’ strategy. It previously only sold individual loans. The move could signal a more aggressive push to deleverage its balance sheet. Lloyds’ overall ambition is to unwind the £24bn worth of bad property loans it holds.
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