LLOYDS Banking Group is reportedly steeling itself for a heavy loss as it prepares to offload a £1bn package of rotten property loans to private equity.
According to reports in the national press, Wednesday will see Lloyds take final bids for Project Royal, a selection of loans made against undesirable industrial sites and commercial buildings across the country.
The Cube, a distinctive block of flats and shops in Birmingham, is one of the better properties in the portfolio and three American private equity firms, Cerberus, Colony Capital and Lone Star, are said to be in the running for the deal.
Sources close to the talks told the Sunday Times that Lloyds would have to take a hit of around 40%, meaning a loss of about £400m. Lloyds is understood to be keen to conclude the sale by Christmas and may pick a preferred party as soon as this week.
The move comes as Lloyds and Royal Bank of Scotland attempt to remove billions of pounds worth of bad property debt from their balance sheets.
Earlier this year RBS signed a deal to sell part of a £1.4bn property loan parcel to American buyout specialist Blackstone. The US firm will take a 25% stake in the portfolio and run it on behalf of the bank, but the deal has been delayed because Blackstone has struggled to raise debt finance.
Lloyds took on £24bn of loans when it rescued HBOS and is expected to put more on the market.
