Lloyds nears deal for Lundy loans portfolio -sources

Fri Aug 10, 2012 9:23am EDT

* TPG and Goldman Sachs in advanced talks for loans -sources

* Loans likely to sell at steep discount to face value -source

By Simon Meads and Matt Scuffham

LONDON, Aug 10 (Reuters) - Lloyds Banking Group is in advanced talks to sell a 1.2 billion pound ($1.9 billion) portfolio of loans, people familiar with the situation said, as the group continues to shed assets following its bailout nearly four years ago.

A consortium of U.S. private equity firm TPG and a division of investment bank Goldman Sachs are in exclusive talks to buy the portfolio, which includes real estate and business loans that were largely made by HBOS before it was taken over by Lloyds, two people said.

Lloyds, which is 40 percent owned by the British government, is looking to reduce its loan book, cut costs and rein in bad debt as part of a recovery plan instigated by Chief Executive Antonio Horta-Osorio to restore the bank to health.

TPG and Goldman beat a handful of other bidders for the so-called Project Lundy portfolio, which is likely to see Lloyds sell the assets at a steep discount to face value, one of the sources said.

Lloyds recently sold another 500 million pound portfolio of loans to Sankaty Advisors, the debt affiliate of Bain Capital, as part of its move to shed bad loans.

Lloyds is not alone in wanting to shrink its loan book. Many banks across Europe, including state-controlled rival Royal Bank of Scotland, have been selling off assets as they attempt to shore up their capital positions.

Specialist private equity groups have been at the front of the queue to buy those loans, seeing an opportunity to make large profits from buying such assets at a fraction of their face value.

Lloyds and TPG declined to comment, Goldman Sachs was unavailable to comment.

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