Bank of Cyprus has agreed to sell its ex-Laiki portfolio of residential and commercial real estate-backed loans in the UK, known as ‘Project Avenue’ and worth £289 mln (€361 mln) to mortgage managers Mars Capital Finance and to Camael Mortgages.
The sale and transfer is expected to be completed by October 31.
The bank said the transaction “will enhance the Group’s liquidity and will have a small positive impact on the Group’s Common Equity Tier 1 capital due to the release of risk weighted assets.”
It added that the sale of the loan portfolio was in line with the restructuring plan and strategy of deleveraging through the disposal of non-core operations and boosting its capital and liquidity.
An additional £261 mln (€325 mln) of gross loans have been deleveraged at par value since March 2013, through redemptions or refinancing from third parties.
HSBC acted as financial adviser to the disposal of the loan portfolio.
The sale price at which Mars Capital acquired Project Avenue is not yet known, however, the discount is thought to be shallow owing to the performing nature of the underlying circa 765 loans, said James Wallace, Finance Editor at CoStar News.
Project Avenue’s loans are extended to a pool of 427 separate borrowers which are secured by more than 500 residential and commercial properties.
Mars Capital was selected after a competitive process, which earlier was understood to have included Macquarie Bank, Deutsche Bank and Blackstone.
The original Project Avenue portfolio had an outstanding balance of £296.4 mln.
Only last month, Bank of Cyprus concluded a deal to sell a real estate package in Romania, saying it would enhance its liquidity by €95 mln.
The bank said it was selling the assets related to Societatea Companiilor Hoteliere Grand S.R.L. (“GHES”), owner of the JW Marriott Bucharest Grand Hotel property to Strabag SE, an Austrian company.
It added that the accounting loss from the transaction would be around €1 mln, but there is a positive impact of €7 mln on the Group’s capital position, after taking into account the reduction in risk weighted assets.
The bank has been disposing of non-core assets, including banking operations in the Ukraine, other assets held by now-defunct Popular Laiki and is considering selling its 80% Russia affiliate, Uniastrum.
Merging of the Bank of Cyprus and ex-Laiki operations has also saved the group some €5 mln in annual rent, while other dormant properties in Cyprus, Greece and the UK are up for sale.
The Group’s jewel insurance businesses, EuroLife and General Insurance Co., will probably stay, as buyers are sought for the CNP Assurance business, 51% controlled by the French Insurance giant that also wants to dispose of its loss-making Cyprus operations.
