Lloyds share price: Bailed bank reputedly taking £200m hit from sale of De Vere hotels
iNVEZZ.com, Monday, December 9: Lloyds Banking Group (LON:LLOY) is reportedly preparing to offload its stake in UK hotel and leisure operator De Vere Group in a move that could force the lender to write off a further £200 million, give or take, of its investment in the troubled company.
Lloyds assumed a £1.7 billion loan to De Vere as part of the tens of billions of pounds of bad loans inherited via the purchase of HBOS in 2008. The 33 percent state-owned bank has already written off £650 million of the original loan value via a comprehensive restructuring and debt-for-equity-swap, which resulted in Lloyds taking partial control of the hotel operator.
Earlier this year, it pushed for the sale of De Vere Venues, the company’s conference centre division comprising 26 properties, the proceeds from which will be used to pay down the remaining around £1.1 billion debt to Lloyds.
According to The Times, a divestment is close to being finalised, with the buyer tipped to be Starwood Capital, the owner of hotel and conference venue operator Principal Hayley Group. The reputed selling price of £230 million is well below the initial target of £280 million to £300 million. The Times also asserts that after the Lazard-managed deal closes, De Vere will engage JP Morgan to run the sale of its two other businesses — De Vere Hotels and De Vere Village Urban Resorts — over the next 12 to 18 months.
According to property industry sources, the proceeds from those disposals are likely to be around £600 million which, when added to the estimated £230 million from the sale of De Vere Venues, leaves a £220 million hole in the company’s debt to Lloyds.
De Vere Village Urban Resorts has 25 properties, each with a health and fitness club and a pool, and is expected to attract strong interest with the division estimated to be worth between £400 million and £440 million. De Vere Hotels, with nine properties featuring golf courses, is valued at £180 – £190 million.
Lloyds was rescued in a £20 billion state bailout in 2008 and has since been acceding to regulatory demands to shore up its capital and strengthening its balance sheet so as to facilitate a sell-down of the remaining 33 percent taxpayer stake in the bank. The government earlier this year transferred a six percent stake to institutional investors for £3.2 billion but wants later divestments to also include retail investors.
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As part of its non-core asset reduction programme, Lloyds last week sold a portfolio of non-performing Irish retail mortgages worth £610 million for £257 million to Apollo Global Management (NYSE:APO) (Lender sells loss-making Irish home loans for £257mn). A week earlier, the bank had quit a distressed portfolio of European corporate real estate loans, booked at £1.09 billion, in a sale to Cerberus Institutional Partners for £860m.
Earlier in November, Lloyds agreed to hand over its asset management business, Scottish Widows Investment Partnership (SWIP), to Aberdeen Asset Management (LON:ADN) in a deal worth up to £660 million (Bank sells SWIP to Aberdeen Asset Management in £660 million deal), and disclosed plans to float off its TSB business next year (TSB IPO planned for next year).
In addition, some analysts are expecting the bank to quit at least 12 percent of its 22 percent stake in London-based wealth manager St. James’s Place (LON:STJ) by mid-December (Bank tipped to sell at least 12% of St. James’s Place by mid-December).
Lloyds shares were trading at 78.47p as of 9:05 UTC today, up 0.29 percent on Friday’s close.
**As of 8:51 UTC buy Lloyds shares at 78.52p.**
**As of 8:51 UTC sell Lloyds shares at 78.48p.**
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