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Lloyds sells Australian loans to Morgan Stanley, Blackstone

by Laura Board in London  |  Published June 6, 2012 at 10:35 AM
The U.K.'s Lloyds Banking Group plc on Wednesday, June 6, agreed to sell an £809 million ($1.25 billion) portfolio of unprofitable Australian corporate real estate loans to a joint venture of Morgan Stanley Real Estate Investing and Blackstone Group LP.

The venture, AET SPV Management Pty Ltd., will pay about £388 million for the loans, or less than half the loans' face value,

The portfolio generated a loss of £183 million in 2011 for Lloyds, which said the impact of the disposal isn't material because of write-downs already undertaken.

Lloyds has been shedding noncore assets to make its balance sheet less risky since its January 2009 bailout, which left the U.K. government with a holding of about 41%. Lloyds said last month noncore assets as of March 31 were £128.3 billion, down from £172.9 billion a year earlier, and representing 13% of total assets.

"This is a further step in reducing noncore assets and de-risking the Lloyds balance sheet," wrote Oriel Securities Ltd. analysts Mike Trippitt and Vivek Raja, who noted that Lloyds expects to have cut noncore assets to below £90 billion by the end of next year.

David Smith, who heads Australian unit Lloyds International Pty Ltd., said in a statement that the latest loans sale "results in a cumulative 92% reduction of our real estate nonperforming loan portfolio" in Australia.

Morgan Stanley Real Estate Investing has acquired $180 billion of assets in 36 countries in its roughly 20 years of existence. It is led by co-CEOs Olivier de Poulpiquet, who relocated to Singapore from London last year, and New York-based John Klopp.

Blackstone Real Estate, led by Jon Gray, has $48 billion of assets under management.

Lloyds expects completion in the third quarter and plans to use the proceeds to cut its debt. Messages seeking further comment were left with representatives of the buyers.
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Tags: AET SPV Management Pty Ltd. | Blackstone Group LP | Lloyds Banking Group plc | Morgan Stanley Real Estate Investing

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