Cerberus to buy NPL portfolio from AIB

The US debt investor will buy loans at a discount in the controversial sale.

Cerberus Capital Management is to buy €1.1 billion of non-performing loans (NPLs) from Allied Irish Bank (AIB).

AIB confirmed it will sell the bad loans, most of which are at least five years in arrears, to the US-based debt specialist for an €800 million cash consideration.

The portfolio, called Project Redwood, has approximately 70 percent of its loans at least five years in arrears, and 90 percent of loans are at least two years in arrears.

Private dwellings and family farm homes and restructured loans are excluded from the deal, which is primarily made up of investment asset properties. The portfolio has 800 customers with an average loan balance of €1.4 million.

The loan book originally contained around €3.8 billion of loans when AIB begun assessing the portfolio last year, though it has been able to restructure some loans during the sale process.

Selling books of home loans to specialist debt investors has been controversial in Ireland, with some politicians labelling investors as “vulture funds”, making the sales politically sensitive, particularly when private family home loans are included.

In February, Irish legislators looked at blocking a sale of non-performing loans by another bank, Permanent TSB, which has some €4 billion of bad mortgage loans to dispose of. Latest reports suggest the size of Permanent TSB’s portfolio has now been reduced to around €2.2 billion due to the exclusion of split mortgages from the sale.