RLPC-RBS cuts loan portfolio sale to 440 mln euros-sources

By Zaida Espana

LONDON, Dec 2 (Reuters) - Royal Bank of Scotland (RBS.L) has reduced the size of the leveraged loan portfolio that will be auctioned on Wednesday to 440 million euros from an original amount of 620 million euros, loan traders said on Tuesday.

The portfolio was put up for sale on November 26 and was reduced when it emerged that some of the assets that RBS was seeking to sell from an investors' warehouse were subject to a lock-up agreement, one loan trader said.

RBS declined to comment.

Some recent loan portfolio sales by banks on behalf of clients who were unable to meet margin calls, including Icelandic banks and hedge funds, have already proved contentious and some investors have started legal proceedings.

Hedge fund Black Diamond filed a suit against Barclays in October, accusing it of failing to return excess capital of around $302 million held under a Total Return Swap Facility.

Under the terms of the lock-up agreement, RBS's client had the opportunity to inject further equity and secure the loan assets in the warehouse for a further period in order to avoid selling the assets and liquidating the portfolio into a falling market.

Average bids on Europe's top 40 leveraged loan names hit fresh record lows of 62.18 percent of face value on Tuesday, RLPC data shows.

The reduction in the portfolio size has cut the volume of paper for sale in some names, including UK waste management firm Biffa, Irish telecom Eircom and Danish telecom TDC, traders said.

(Reporting by Zaida Espana)