AIB and PTSB have agreed to offload portfolios of soured loans to US distressed debt firms as they seek to free up expensive capital they must hold in reserve against the loans.
US group Cerberus is buying an AIB portfolio, dubbed Project Fir, which is made up of personal loans, mortgages, small business facilities and commercial property debt that originally had a combined value of about €500 million, according to sources.
The secured loans have been in default for an average of more than six years, while the unsecured personal loans, which make up the majority of the 10,000 customers involved, have been in arrears for about two years, on average.
Cerberus has lined up debt servicing firm BCM Global to manage the secured loans, including mortgages, while Everyday Finance will take responsibility for the unsecured loans.
RM Block
The servicers will be interacting directly with the customer, following transfer of their loans.
“At AIB, for customers in difficulty, our focus has been to put in place sustainable solutions to help them to get back on track,” a spokesman said. “The bank’s preference is to provide solutions through customer engagement on a case-by-case basis. AIB continues to support customers through a comprehensive range of forbearance solutions, and we have done so in over 165,000 cases.”
AIB has reduced its non-performing loans from €31 billion in 2013 to €2 billion, or 2.8 per cent of gross loans, as of September.
PTSB has agreed to offload loans with a gross balance sheet value of €76 million to funds managed or advised by a distressed debt unit of Apollo Global Management.
Debt servicing firm Mars Capital will manage the loans on a day-to-day basis.
The deal will see Mars take control of about 490 loans secured against 455 properties and linked to 410 borrowers. All the loans are classed as non-performing, PTSB said. About 55 per cent are related to tracker loans, while 35 per cent are on variable interest rates. The remaining 10 per cent are on fixed rates.
Loan sales have been a feature of how Irish banks have dealt with loans that have been non-performing for an extended period of time since the financial crisis.
European regulators introduced rules a decade after the crash requiring banks to set aside provisions equal to 100 per cent of a non-performing loan within three to seven years after the default date. That incentivises banks to address such borrowings or get them off their books.
The PTSB transaction comes days after the bank formally put itself up for sale. This deal is not related to the sale of the lender itself, PTSB said.
“The terms and conditions of individual loan accounts, including any ’alternative repayment arrangements’ agreed between customers and PTSB, remain unchanged and will continue to apply post the transfer to Mars Capital,” the bank said.
