KKR and Australia’s Allegro Funds have agreed to buy around A$350 million ($364 million) distressed commercial loans from a unit of Lloyds Banking Group, writes Reuters. The deal is the latest in a series of portfolio loan sales struck in Asia, as new capital requirements force European lenders to retreat from the region and focus on their home markets.
Reuters – KKR & Co L.P. and Australia’s Allegro Funds have agreed to buy around A$350 million ($364 million) worth of distressed commercial loans from a unit of Lloyds Banking Group Plc, a source familiar with the matter said on Thursday.
The deal is the latest in a series of portfolio loan sales struck in Asia, as tough new capital requirements force European lenders to retreat from the region and focus on their home markets.
Cashed-up private equity funds and some Japanese lenders have been using the opportunity to buy these loans, which are often sold a deep discount to their face value.
Many of the loans were extended before the global financial crisis and then went bad.
In the latest deal, Lloyds’ Australian unit, BOS International, sold the loan portfolio, from a mix of sectors, at a discount of around 50 percent, the source added.
Earlier, KKR and Allegro said in a statement that they had agreed to buy a portfolio of commercial loans from a unit of the British lender, without disclosing details. The source declined to be identified as details of the sale were not made public.
Lloyds inherited the assets when it acquired HBOS in 2008, including the Bank of Scotland and its international unit, BOS International. It has been offloading loan portfolios as part of a plan to wind down non-core assets.
Earlier this year, Lloyds sold a $1.2 billion portfolio of distressed Australia property loans to Morgan Stanley and Blackstone Group and last year it off-loaded A$1.7 billion in distressed property loans to Morgan Stanley and Goldman Sachs.
Global private equity firms are gearing up to raise credit funds to tap the investment opportunities created as banks de-leverage, including loan portfolios. KKR made the acquisition through its special situations business, which was set up in 2010 and which invests from a $2 billion global fund.
KRR’s team was established at the end of 2009 and has made several investments in Asia.
Allegro is an Australian fund manager which invests primarily in mid-market Australian and New Zealand businesses and which has $300 million in committed capital.