Lloyds Banking Group Plc (LLOY) agreed to sell 809 million pounds ($1.25 billion) of Australian corporate real estate loans to a Morgan Stanley (MS:US) and Blackstone Group LP (BX:US) joint venture for about 388 million pounds in cash.
Lloyds will use the proceeds from the deal to repay debt, the London-based company said in a statement today. The loans generated losses of 183 million pounds last year, said Lloyds, the U.K.’s second-biggest government-aided bank.
“This transaction further de-risks the Australian business,” removing 92 percent of the non-performing real estate loans, Dave Smith, chief executive officer of Lloyds International Pty Ltd., said in the statement. Smith’s company is a Sydney-based unit operating in Australia and New Zealand.
European banks are trying to sell real estate assets as they seek to meet stricter capital rules. Lloyds, which has cut more than 30,000 jobs since its 20 billion-pound taxpayer rescue in 2008, last month raised its asset-reduction plan for the year by 5 billion pounds to at least 30 billion pounds and expects to meet its 2014 target a year early.
Lloyds gained as much as 6.4 percent in London trading, the most since May 1. The shares were up 1.29 pence, or 5 percent, at 27 pence at 10:50 a.m. in London, paring the decline for the past 12 months to 43 percent.
Banks and other creditors cut U.K. commercial real estate lending by 6.8 percent to 212.3 billion pounds last year as they tried to meet new regulations, according to a survey by De Montfort University published on May 18.
Lloyds sold more than 900 million pounds of mortgage-backed loans to Lone Star Funds in December at a 40 percent discount to par value, two people with knowledge of the matter said at the time. That portfolio was known as Project Royal.
The company is planning the sale of a portfolio of commercial property loans known as Project Royal 2, a person with knowledge of the matter said last month.
The transaction announced today is expected to close in the third quarter, Lloyds said.
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