Photographer: Chris Ratcliffe/Bloomberg

RBS to Sell $2.5 Billion of Irish Loans at 78% Discount

  • RBS units to receive about 360 million pounds in cash for deal
  • Lone Star and Cairn Homes agree to buy loans linked to land

Royal Bank of Scotland Group Plc’s Irish units agreed to sell 1.63 billion pounds ($2.5 billion) of real estate loans to Lone Star Funds and homebuilder Cairn Homes Plc.

At completion, Ulster Bank Ireland Ltd. and Ulster Bank Ltd. will receive about 360 million pounds in cash at current exchange rates, a gain of about 245 million pounds compared with the book value, RBS said in a statement on Monday. The loans had a loss of about 28 million pounds in 2014.

RBS injected 15.3 billion pounds into Ulster Bank between 2008 and 2013 and moved billions of euros of risky real estate assets from the unit’s balance sheet into a company bad bank. Demand for land in Ireland is rising again in tandem with home prices, as the economy recovers from one of the worst recessions in Western Europe.

The loan portfolio, known as Project Clear, includes about 20 percent of all the space zoned for residential use in Dublin, Cairn said in a separate statement. The deal will be completed this year and the loans will be split between the buyers, with Cairn contributing 378 million euros ($410 million) of the cost, the Dublin-based homebuilder said.

Cairn’s 75 percent share of the portfolio gives the company the opportunity to build more than 14,000 homes over the coming years, Chief Executive Officer Michael Stanley said.

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