The battle for Lloyds Banking Group’s £625m Project Harrogate non-performing loan portfolio has intensified, with just two bidders left in the running.
Oaktree Capital Management and a joint bid from Kennedy Wilson and Deutsche Bank were the final parties left standing from an original four-strong shortlist as Estates Gazette went to press.
It is understood that Lone Star and Cerberus Capital Management had both been informed by Wednesday that their bids for the 70-strong NPL portfolio had not been successful.
Following the selection of a preferred party, Lloyds is expected to move quickly to complete the deal. It took only three weeks to close its first UK NPL sale, Project Royal, to Lone Star in December.
If the listed global alternative markets-focused investment manager Oaktree wins the auction, it would be the firm’s first transaction in the UK NPL portfolio market. It had already looked at a number of deals in Europe, including disposals by Société Générale.
The firm is understood to be working with loan special servicer Hatfield Philips to complete its loan-by-loan due diligence.
In 2010, Oaktree participated in a recapitalisation of commercial property finance firm LNR, which owns Hatfield Philips through its European division, LNR Partners Europe.
Kennedy Wilson and Deutsche Bank have already been active in the market, snapping up Bank of Ireland’s £1.1bn UK loan portfolio in two tranches. The partners are also buying Lloyds’ Project Prince €360m portfolio of Irish loans.
The Beverly Hills-headquartered firm recently completed a €2bn formal tie-up to buy distressed European property loans with the German bank as it continues its push into Europe.
Deutsche Bank provides both equity and debt for the deals.
Project Harrogate, also dubbed Project Royal II, comprises around 70 loans secured against slightly fewer than 60 secondary properties throughout the UK, owned by around 25 different borrowers.
The largest 20 loans make up the majority of the outstanding £625m nominal value, and the largest 20 properties are all outside London.
JP Morgan is running the sales process. All parties declined to comment.
