AIB postpones €1.3bn problem mortgages sale amid Covid-19 crisis

AIB, the Republic's largest mortgage lender, has moved to postpone indefinitely its first sale of a deeply distressed owner-occupier loan book, which was set for final bids in middle of next month, according to sources.

It is estimated that the portfolio, dubbed Project Oak, included mortgages that had an original value of €1.3 billion and was set to achieve a discounted rate of between €700 million and €800 million.

Overseas distressed debt firms Lone Star and Cerberus were said to be among the firms to have expressed an interest in the assets when they were put on the market earlier this year.

“AIB does not comment on media speculation. Our sole focus is on supporting our customers and the Irish economy through this time of crisis,” a spokesman for the bank said.

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News of the loan sale deferral comes a day after the country’s five mainstream banks signed up to a temporary industry-wide stay on legal proceedings and repossessions, as well as an offer of a “payments holiday” for homeowners and businesses affected by the coronavirus pandemic. Both measures are set to last for up to three months.

Sales

AIB reduced its non-performing loans (NPLs) from €6.1 billion in December 2018 to €2.8 billion by the end of last year, assisted by two loan portfolio sales, resulting in an NPLs ratio of 5.4 per cent.

The two portfolios were mainly comprised of loans tied to investment properties, including buy-to-let buildings, commercial property and land and development assets.

While both of those portfolios had small numbers of owner-occupier loans, tied to borrowers whose commercial loans were included in the sales, Project Oak was the first owner-occupier-focused loan book that AIB had ever put on the market.

It was said to mainly contain loans deep in arrears, where borrowers had refused to engage with the bank on restructuring solutions.

Ulster Bank and Permanent TSB had sold billions worth of loans tied to primary dwellings in recent years amid pressure from regulators that they reduce their NPLs ratios towards the EU average, which currently stands at about 3 per cent.