Nationwide is considering creating a special-purpose vehicle to help restructure distressed loans in its £13bn commercial property loan book.
In a sign that more lenders are starting to get to grips with commercial property issues, the UK’s largest building society is weighing up options to best deal with problem loans without incurring large losses.
It aims to find consensual solutions to restructuring issues with borrowers where loans have been hit by the recession, but is also weighing up options on how to proceed if this is not possible.
As well as formal insolvency proceedings, these options include introducing an SPV which could hold and manage assets that the bank would not want to sell into the market at a large loss, and bringing in joint venture partners to manage assets.
The move to create a loan workout vehicle would be in line with the actions taken by other UK banks to address their restructuring needs.
For several years, Royal Bank of Scotland has used West Register, a subsidiary company headed by Paul Aubrey, to manage assets, mainly residential development schemes which the bank had lent against.
If RBS believes that it cannot sell an asset without crystallising a large loan loss, then West Register buys and holds the asset.
Lloyds Banking Group is also understood to be in the process of creating a vehicle, provisionally called Tennyson, which could perform a similar function.
It would also be able to “warehouse” assets that Lloyds Banking Group could later form into portfolios for sale, or even set up companies that could be floated on the stock market.
In the main, Nationwide underwrites senior debt and avoids development finance, so its vehicle would primarily consist of commercial investment assets.
Mark Bampton, head of specialised support at Nationwide Commercial, said: “We’re in the early stages of examining the possibility of creating a new special-purpose vehicle to help with distressed situations. As a lender with a significant commercial loan book, it is appropriate to consider having a range of debt restructuring and workout strategies available to us.
“Depending on the ownership structure of the assets and property companies involved, that could involve a new SPV, joint ventures or formal enforcement, if we can’t come to a consensual agreement with the existing borrower.e_SDRq
