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Four Project Chestnut finalists prepare to submit bids on Friday week

By James Wallace - Thursday, July 10, 2014 14:58

National Australia Bank (NAB) has selected four finalists to progress to second and final bids for its debut UK non-performing loan portfolio, the £674m Project Chestnut, which are due Friday week.

CoStar News understands that the four-strong finalists are comprised of CarVal Investors, Cerberus Capital Management, Oaktree Capital Management and Pimco.

Final bids for Project Chestnut are due on Friday 18 July, which is being sold by Morgan Stanley.

Shortly after Project Chestnut came to market, on 30 May CoStar News reported a detailed overview of the loan portfolio, which can be seen here.

Project Chestnut has two sub-pools, comprised of loans originated through NAB’s UK banking subsidiaries, Clydesdale and Yorkshire banks.

By unpaid balance, just under two-thirds of the outstanding debt, or 65.6%, is secured by Project Chestnut’s first granular subpool, while the second subpool is residential-dominant.

Project Chestnut’s ‘Pool A’ is comprised of 123 loans with a gross balance of £442m, against a current carrying market value of £381m, implying a weighted LTV of 116%.

The loans in pool A – secured by 255 commercial properties, 490 residential assets across 71 connected borrowers – are either already in default, passed maturity or near maturity. Around 80% of the assets within pool A remain cash flow producing.

The granular sub-pool includes £316m worth of loans which are all sub £20m each, reflecting 71.5% of pool A.

By sector, pool A is 35.7% secured by residential assets, 21.9% by office assets, 15.5% by retail assets, 9.1% by industrial assets, 7.5% by tourism and leisure properties and the balance in mixed use and miscellaneous.

Project Chestnut’s ‘Pool B’ is comprised of 309 small business loans with a gross balance of £232m secured by 1,448 of residential properties and 157 of commercial properties.

Just under three-quarters, or 74% of pool B’s loans are in default, however the aggregate market value of the subpool is £247m, implying a weighted LTV of 93.9%.

NAB had been mulling a potential loan portfolio sale for several months, after it first confirmed its intention to permanently exit UK commercial property lending two years ago.

All parties declined to comment.

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