Goldman Sachs snaps up struggling AIB property loans

The transfer will affect around 1,200 borrowers...

AIB has sold a large bundle of non-performing buy-to-let property loans to Goldman Sachs, as it continues to clean up its balance sheet ahead of a likely stock market reflotation.

The €200m deal represented a 50% discount on the original loan value of the 'Project Cypress' portfolio. It contains around 1,500 loans, with the deal affecting roughly 1,200 borrowers, many of whom are in receivership.

AIB announced yesterday that it is now contacting borrowers to inform them of the loan transfer.

The Irish Independent reports that the sale to Goldman Sachs will raise concerns among tenants about how the new owners plan to recoup their investment. There has, however, been confirmation that existing legal and regulatory protections will remain in place.

The deal comes as AIB prepares to return to the stock exchange. The near €3bn flotation on London and Dublin markets may take place within the next two months and would reduce the State's stake in AIB by 25%. It currently owns 99.9% of the bank, which was bailed out by the tax payer to the tune of €20.8bn during the financial crisis.

Some €3.3bn has been repaid thus far through redeeming preference shares and contingent capital notes issued to Ireland during the crisis. Minister for Finance Michael Noonan has said it could take up to a decade for the lender to become fully privatised.

The quantum of non-performing loans on AIB's books has fallen from €28.9 billion to €9.1 billion at the end of 2016.

Newstalk business editor Vincent Wall outlined why AIB struck the Goldman Sachs deal:

"They and other banks have made it clear they’re coming under increasing pressure from the regulators – the ECB in Frankfurt and the Central Bank here – to accelerate the process of dealing with non-performing loans, particularly the more difficult and less resolvable ones that now remain after three years of bad debt management.

"Permanent TSB Bank is in the same position and hasn’t ruled out a similar heavily-discounted sale of some of its remaining indebted home loans was well."

"The Government is looking two ways on this," he continued.

"As the only significant shareholder in AIB and majority shareholder in PTSB, it needs those banks to reduce the bad debts on their balance sheets; free up reserves and management time to get lending moving again; and of course, in AIB’s case present an attractive proposition for the sale of a 25% shareholding.

"But, politically, they don’t want to be seen to be putting additional pressure on home-owners and their tenants in the case of buy-to-let investments

"And then there’s the buyers of these loans ...What will they do next?  Most likely break up the portfolio; sell it on in smaller batches; probably to more aggressive investors."