Blackstone deal offloads £1.4bn of RBS's riskiest debt

Royal Bank of Scotland is preparing to offload £1.4bn of high-risk debt after striking a deal with the private equity company Blackstone.

Under the deal – expected to be signed off within days – Blackstone will take a 25 per cent stake in a new vehicle set up to hold the loans – which are some of the riskiest "non-core" assets on the state-owned bank's books. The 30 loans are largely commercial mortgages lent against property such as pubs, car dealerships, nursing homes and parking lots.

The remaining 75 per cent of the new vehicle will be held by RBS, but it plans to sell down its stake if and when the value of the loans improves.

It is understood that money to cover the bank should the loans default has already been set aside under its regular provisions for bad debt. Management are understood to be holding back on selling more because the bank would have to take a substantial hit on their value were they to do so now.

The mortgages are all for amounts of at least 90 per cent of the value of the properties they are lent against. It is expected that at least some of those properties will be sold by Blackstone – whose distressed debt specialists will manage the portfolio – while remaining loans will require restructuring.

Management want to get the loans off RBS's books as soon as possible as they seek to return the company to private ownership. However, they will not be able to do this until they are able to sell down the bank's stake to under 50 per cent.

RBS was one of the most aggressive lenders to the commercial property sector in the run up to the credit crunch. It has had to take substantial impairments against its £80bn loan book, more than half of which is now considered "non core".

The loans it is selling hit trouble during the financial crisis as the value of commercial property tumbled.

The terms of the deal – including the price paid by Blackstone – are unlikely to be disclosed, although the discount to the loans' face value is said to be "substantial".

Neither RBS nor Blackstone would comment yesterday. But Blackstone is thought to have seen off rivals including Loan Star, Westbrook and KKR with RBS in talks over a deal for the best part of a year.

While the arrangement has been described by bankers as "innovative", deals between banks and distressed debt specialists have proved highly controversial in the past.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Financial Controller

£45 - £55k DOE: Guru Careers: A Financial Controller is required to join a suc...

Recruitment Genius: Sales Consultant / Telemarketer - OTE £20,000

£12500 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...

Recruitment Genius: Sales Adviser - OTE £24,500

£22500 - £24500 per annum: Recruitment Genius: Inbound and outbound calls with...

Recruitment Genius: Business Development Executive / Sales - OTE £40,000

£18000 - £40000 per annum: Recruitment Genius: This fast growing Insurance Bro...

Day In a Page

Mullah Omar, creator of the Taliban, is dead... for the fourth time

Mullah Omar, creator of the Taliban, is dead... again

I was once told that intelligence services declare their enemies dead to provoke them into popping up their heads and revealing their location, says Robert Fisk
Margaret Attwood on climate change: 'Time is running out for our fragile, Goldilocks planet'

Margaret Attwood on climate change

The author looks back on what she wrote about oil in 2009, and reflects on how the conversation has changed in a mere six years
New Dr Seuss manuscript discovered: What Pet Should I Get? goes on sale this week

New Dr Seuss manuscript discovered

What Pet Should I Get? goes on sale this week
Oculus Rift and the lonely cartoon hedgehog who could become the first ever virtual reality movie star

The cartoon hedgehog leading the way into a whole new reality

Virtual reality is the 'next chapter' of entertainment. Tim Walker gives it a try
Ants have unique ability to switch between individual and collective action, says study

Secrets of ants' teamwork revealed

The insects have an almost unique ability to switch between individual and collective action
Donovan interview: The singer is releasing a greatest hits album to mark his 50th year in folk

Donovan marks his 50th year in folk

The singer tells Nick Duerden about receiving death threats, why the world is 'mentally ill', and how he can write a song about anything, from ecology to crumpets
Let's Race simulator: Ultra-realistic technology recreates thrill of the Formula One circuit

Simulator recreates thrill of F1 circuit

Rory Buckeridge gets behind the wheel and explains how it works
Twitter accused of 'Facebookisation' over plans to overhaul reverse-chronological timeline

Twitter accused of 'Facebookisation'

Facebook exasperates its users by deciding which posts they can and can’t see. So why has Twitter announced plans to do the same?
Jane Birkin asks Hermès to rename bag - but what else could the fashion house call it?

Jane Birkin asks Hermès to rename bag

The star was shocked by a Peta investigation into the exotic skins trade
10 best waterproof mascaras

Whatever the weather: 10 best waterproof mascaras

We found lash-enhancing beauties that won’t budge no matter what you throw at them
Diego Costa biography: Chelsea striker's route to the top - from those who shared his journey

Diego Costa: I go to war. You come with me...

Chelsea's rampaging striker had to fight his way from a poor city in Brazil to life at the top of the Premier League. A new book speaks to those who shared his journey
Ashes 2015: England show the mettle to strike back hard in third Test

England show the mettle to strike back hard in third Test

The biggest problem facing them in Birmingham was the recovery of the zeitgeist that drained so quickly under the weight of Australian runs at Lord's, says Kevin Garside
Women's Open 2015: Charley Hull - 'I know I'm a good golfer but I'm also just a person'

Charley Hull: 'I know I'm a good golfer but I'm also just a person'

British teen keeps her feet on ground ahead of Women's Open
Turkey's conflict with Kurdish guerrillas in Iraq can benefit Isis in Syria

Turkey's conflict with Kurdish guerrillas in Iraq can benefit Isis in Syria

Turkish President Erdogan could benefit politically from the targeting of the PKK, says Patrick Cockburn
Yvette Cooper: Our choice is years of Tory rule under Jeremy Corbyn or a return to a Labour government

Our choice is years of Tory rule under Corbyn or a return to a Labour government

Yvette Cooper urged Labour members to 'get serious' about the next general election rather than become 'a protest movement'