* Deal worth around $364 million-source
* Portfolio sold at a discount of around 50 pct
* Lloyds previously sold distressed loans to Blackstone,
Morgan Stanley, Goldman
* Lloyds held 7.7 bln stg of Australian assets at end June
* Lloyds shares down 0.5 percent
By Stephen Aldred and Matt Scuffham
HONG KONG/LONDON, Nov 8 KKR & Co L.P.
and Australia's Allegro Funds have agreed to buy around A$350
million ($364 million) of distressed commercial loans from a
unit of Lloyds Banking Group Plc, a source familiar
with the matter said on Thursday.
The deal is the latest in a series of portfolio loan sales
struck in Asia, as tough new capital requirements force European
lenders to retreat from the region and focus on their home
Cashed-up private equity funds and some Japanese lenders
have been using the opportunity to buy these loans, which are
often sold at a deep discount to their face value.
Many of the loans were extended before the global financial
crisis and then went bad.
In the latest deal, Lloyds' Australian unit, BOS
International, sold the loan portfolio, from a mix of sectors,
at a discount of around 50 percent, the source added.
Earlier, KKR and Allegro said in a statement that they had
agreed to buy a portfolio of commercial loans from a unit of the
British lender, without disclosing details.
The source declined to be identified as details of the sale
were not made public.
Part-nationalised Lloyds inherited the assets when it
acquired HBOS in 2008, including the Bank of Scotland and its
international unit, BOS International. It has been offloading
loan portfolios as part of a plan to wind down non-core assets.
Lloyds, which was bailed out by Britain during the 2008
crisis, shed 30.7 billion pounds worth of non-core assets from
its balance sheet in the first nine months of the year.
That was on top of a 53 billion pound reduction last year
and left it with a non-core portfolio worth 110 billion pounds.
European lenders have been retreating from the Australian
loan market to free up funds.
Lloyds sold $1.2 billion of distressed Australia property
loans in June to Morgan Stanley and Blackstone Group
following an A$1.7 billion disposal last November to
Morgan Stanley and Goldman Sachs.
At the end of June it still held Australian assets worth 7.7
UK banks are under pressure from regulators to bolster their
capital buffers to protect themselves against any worsening of
the euro zone debt crisis and to avoid having capital deficits
when tougher new Basel III capital rules are applied.
"While we do not anticipate the need for rights issues to
close these gaps, banks may be under pressure to sell additional
assets at prices that may not be in the best interest of
shareholders," said Shore Capital analyst Gary Cooper.
The Financial Times reported on Thursday that Lloyds is
attempting to sell stakes in a clutch of housebuilders and the
bank is also rumoured to be considering a sale of its 60 percent
stake in wealth manager St James's Place.
Meanwhile, rival RBS has faced calls for it to
dispose of its U.S. business, Citizens.
Shares in Lloyds were down 0.5 percent to 44.25 pence at
1245 GMT, meaning taxpayers are currently sitting on a loss of 6
billion pounds on the 20 billion pumped in by Britain to keep it
Global private equity firms are gearing up to raise credit
funds to tap the investment opportunities created as banks
de-leverage, including loan portfolios.
KKR made the acquisition through its special situations
business, which was set up in 2010 and which invests from a $2
billion global fund.
KRR's team was established at the end of 2009 and has made
several investments in Asia.
Allegro is an Australian fund manager which invests
primarily in mid-market Australian and New Zealand businesses
and which has $300 million in committed capital.