AIB and PTSB Sell Bad Loan Portfolios to Leading US Distressed Debt Firms

AIB and PTSB have decided to transfer portfolios of non-performing loans to American distressed debt firms. This strategic move aims to liberate costly capital that banks need to maintain against these loans.

AIB’s Loan Portfolio Sale

One significant transaction involves AIB selling a loan portfolio named Project Fir to US-based Cerberus. This portfolio contains personal loans, mortgages, small business loans, and commercial property debt. Originally, it had a total value of approximately €500 million.

• Secured loans have been in default for over six years.
• Unsecured personal loans, which comprise most of the 10,000 accounts, have been in arrears for about two years.

Cerberus has engaged BCM Global as the servicing firm for the secured loans, while Everyday Finance will handle the unsecured loans. This arrangement means that these firms will communicate directly with customers after the transfer.

Comments from AIB

AIB emphasizes its commitment to aiding customers facing difficulties. A bank representative stated, “Our focus has been to put in place sustainable solutions to help them get back on track.” The bank has supported over 165,000 cases with various forbearance options.

PTS Bank Loan Transfer

Similarly, PTSB has arranged to sell non-performing loans with a total gross balance of €76 million to distressed debt units advised by Apollo Global Management. This deal will see Mars Capital managing these loans daily.

• The PTSB portfolio includes 490 loans linked to 455 properties and 410 borrowers, all categorized as non-performing.
• Loan types include 55% tracker loans, 35% variable interest loans, and 10% fixed-rate loans.

This loan sale aligns with a broader trend among Irish banks, which have been active in offloading non-performing loans since the financial crisis. European regulations introduced rules mandating that banks reserve 100% of non-performing loans within three to seven years of default.

PTS Bank’s Current Status

It is noteworthy that the PTSB deal occurred shortly after the bank announced its intention to seek a buyer. However, this loan sale is separate from its sale process, ensuring existing customer agreements remain intact post-transfer.

The trend of banks selling off bad loan portfolios is crucial for maintaining financial stability and ensuring compliance with regulatory requirements.