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RBS Puts Turkish Shipping Loans Up For Sale

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By Reuters 2016-08-11 21:27:26

Royal Bank of Scotland has put its portfolio of Turkish shipping loans up for sale, in the latest move by the state-backed bank to exit this troubled sector and cut overall losses through asset sales, two sources told Reuters.

RBS, which has not made an annual profit since 2007, is restructuring under chief executive Ross McEwan and is looking to offload its entire shipping loans business to shore up its capital and avoid more losses on distressed debt.

The sources, who declined to be identified, told Reuters the bank was looking to sell between $200 million to $500 million worth of Turkish-related shipping loans.

RBS, which reported 2.05 billion pounds ($2.66 billion) of losses for the first half of 2016, declined to comment.

The British bank had been a big lender to the global shipping industry but has shrunk its balance sheet and largely retreated from non-UK lending since a 46 billion pound government bailout during the financial crisis.

The shipping industry has been through tough times since the crisis in 2008, hit by a combination of slowing demand and a glut of ships that has battered bottom lines and caused some casualties.

One source estimated the Turkish loans RBS aims to sell would have been worth double their current value at the market peak before the 2008 crisis.

The bank is also trying to sell its much larger Greek shipping business, which is valued at around $3 billion, sources told Reuters earlier this year.

Reuters reported in June that Credit Suisse and China Merchants were among the suitors for the Greek operation but Britain's vote to leave the European Union had partly led to potential buyers backing off.

The bank has hired Lazard as advisers on the sale of the Greek business but is likely to market the sale of the Turkish portfolio itself, several finance industry sources said. Lazard declined to comment.

TOUGH SELL

RBS's shipping exposure was 6.765 billion pounds at end June - not much changed from the end of 2015, RBS data showed. Nearly 6 billion pounds of that was managed by its Capital Resolution Group, its so-called 'bad bank'.

It recorded a net impairment charge of 263 million pounds primarily related to its shipping portfolio in the first six months of 2016.

Neither RBS nor the financial sector sources have disclosed a likely timeframe for a sale of the Turkish shipping loans but the political turmoil in Turkey and subsequent threats to its investment grade status could dampen investor interest in the country, one of the sources said.

Meanwhile, the limited level of interest in its Greek shipping loans business so far has raised questions about the bank's strategy of trying to sell it.

The bank hosted a roadshow in Asia last month in an effort to drum up interest for the Greek operation, according to one of the financial sector sources and a third source with direct knowledge of the bank's disposal plan.

The third source said it was unclear if a single buyer could be found for the entire Greek business or whether RBS would opt to sell the loans off in parcels.

"There is a price at which it is not worth selling it," the source said, suggesting shareholders might be better served if the bank opted to scrap a heavily-discounted sale and run down the loans instead.

The source also flagged possible buyer interest from China or Japan, pointing to RBS's sale of its aircraft leasing business to Sumitomo Mitsui Banking Corporation in 2012.

"If you get into China and Japan for example there is lots of money floating around looking for some yield," the source said.