(Adds comments from Nordea)
By Jonathan Saul and Matt Scuffham
LONDON, April 30 Lloyds Banking Group
has reached an agreement to sell $500 million of shipping loans
from its remaining ship finance portfolio as the British bank
cuts sector exposure, finance and banking sources familiar with
the matter said on Wednesday.
The deal is the latest in a flurry of sales of ship finance
loans, many of which are being put up for sale by banks under
pressure to boost their capital to comply with new, stricter
industry legislation since the financial crisis.
The banks have suffered alongside the shipping firms they
lent to, as the latter endured one of their worst downturns in
decades. Many firms defaulted on loans and several collapsed. As
a result, banks are offloading what they see as risky assets at
cheaper prices, even as trading conditions improve.
Bank of America and U.S. hedge fund Davidson Kempner
Capital Management were expected to buy the Lloyds' loans, one
of the sources said. Another source added that the terms of the
deal were being finalised.
Lloyds, Bank of America and Davidson Kempner all declined to
Pricing on the deal was in the region of 80 percent of the
value of the loans, one of the sources said.
"Lloyds are keen to get out of shipping and this deal is
part of their efforts to speed up the process," another source
In February, finance and banking sources said Lloyds was
looking to the sell the $500 million tranche as the state-backed
bank cuts the size of its balance sheet to reduce risk.
The state-backed bank accelerated the run-down of its
shipping portfolio last year and sold 2.7 billion pounds of
loans, contributing to a 35 billion pound reduction in its
non-core assets to 64 billion pounds.
Lloyds' sale of shipping loans last year left it with 965
million pounds ($1.63 billion) of net ship finance loans at the
end of December, down from more than 7 billion pounds at the
peak of the financial crisis.
Lloyds, its British rival Royal Bank of Scotland and
Germany's Commerzbank and HSH are among major
European banks seeking to sell shipping loans to investors
including private equity funds.
Nordea, the Nordic region's biggest bank by market
value, remained committed to its ship finance business, the
bank's chief executive Christian Clausen said.
Clausen said Nordea's shipping business was "super
"We never lost money on shipping during the crisis. We made
money every quarter, although we had writedowns and losses. We
have a huge shipping operation," Clausen said at the Reuters
Financial Regulation Summit in London on Wednesday.
"We are fine. Those that made the mistakes lent money to
individual ships," Clausen added.
(Additional reporting by Steve Slater, Editing by David Goodman
and Elaine Hardcastle)