Royal Bank of Scotland has struck a deal to sell a portfolio of loss-making Irish property loans.
The state-backed lender said its Ulster Bank arm will receive about £360 million from the sale, to Irish builder Cairn Homes and an affiliate of US private equity firm Lone Star Funds.
The gross assets covered by the loans, which generated a loss of about £28m last year, were about £1.63 billion and the loans had a carrying value of about £115m.
RBS said the sale, expected to complete by the end of this year, is expected to generate a gain compared to carrying value of about £245m, which will be recognised in the fourth quarter. The proceeds will be used for “general corporate purposes”, the Edinburgh-based bank said.
It added that the transaction “is in line with the bank’s plan to strengthen its capital position and reduce higher-risk exposures”.
The sale comes the week after the Bank of England said RBS – along with rival Standard Chartered – had only passed its annual capital “stress tests” because the lenders showed that they raised or would raise extra capital during the exercise.
RBS also said today that it had signed agreements with three investment partners – AIG Asset Management, Hermes Investment Management and M&G Investments – to give more private equity-backed firms greater access to capital.
The agreements will allow medium-sized companies owned by private equity sponsors to borrow up to £100m in a single transaction that can be co-funded by all four lenders. AIG, Hermes, M&G and RBS will co-invest up to £100m in a single deal, with RBS typically providing between £15m and £30m of its own capital
RBS said it has already completed three transactions, totalling about £250m, for firms working in IT software, the laundry services sector and the “fast casual” restaurant arena.
Richard Roach, head of financial sponsors at the group, 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.”