Cerberus buys €660m loan package at 34% discount

US hedge fund Cerberus is acquiring a sub-performing UK property loanbook from state-backed Lloyds Banking Group for £352 mln (€434 mln), representing a 34% discount to its gross value.

The Project Avon loans, with a gross value of £536 mln (€660 mln), are being acquired by Promontoria Holding 109, an affiliate of Cerberus Global Investors.

In a statement to the Stock Exchange, Lloyds said that the portfolio generated a £17 mln loss last year.

'The sale proceeds will be used for general corporate purposes and the transaction is not expected to have a material impact on the group, including on its capital position, due to existing provisions taken against these assets,' it added.

The transaction, which is expected to complete in the second half of 2014, is part of the bank’s non-core asset reduction programme after its taxpayer rescue during the financial crisis.

Cerberus has been the major winner of the Lloyds' portfolios for sale. Last year, it bought €1 bn worth of Continental European commercial real estate loans from the bank at a 21% discount to their face value.

In April this year Cerberus also won NAMA’s £4.5 bn Project Eagle loan book - the largest single sale by the Irish bad bank to date. The portfolio consists of loans owned by Northern Ireland-based debtors and secured by assets in Northern Ireland, the Republic of Ireland, the UK and other European locations.