Royal Bank of Scotland’s £1.4bn Project Isobel agreement with Blackstone is hanging in the balance as swap costs and funding issues play havoc with the deal.
The lender which, in July, selected the US private equity giant to take a 25% equity stake in a fund to hold the property loans, is still in negotiations following the recent fall in swap costs to historic lows.
It is understood that Blackstone wants to adjust the deal to reflect the additional costs, and is negotiating to split the fall in value of the loans with RBS.
Blackstone is also understood to be facing difficulties lining up a lender to provide debt on the transaction.
It was looking for debt of around 50-60%, and had approached a number of banks including HSBC and investment banks Goldman Sachs and Citigroup.
The pair are also now in discussions over whether RBS could provide debt for the disposal.
The problematic deal has raised concerns in the industry as an increasing number of institutions, including Lloyds Banking Group and Ireland’s National Asset Management Agency, look to trade loan portfolios.
However, one source believes there is enough pent-up demand from investors who have “strategic relationships” with banks to soak up any future sales.
RBS had planned to hold a 75% equity stake in the jointly owned vehicle, which it would sell down over time. Blackstone was to buy a 25% share and manage the properties.
The portfolio will remain on RBS’s balance sheet until it has sold its equity stake below 50%.
The underlying assets, of which there are around 30, were deemed riskier to the bank because they were outside so-called prime locations.
