Royal Bank of Scotland (RBS) is in talks to sell a shipping loan worth close to $800 million as part of moves to scale down exposure to the seaborne industry, sources familiar with matter said.
The sources said RBS was looking to sell its outstanding loan in U.S.-headquartered dry bulk group Eagle Bulk Shipping . RBS and Eagle Bulk both declined to comment.
RBS, 81 percent owned by the UK taxpayer, is one of several European banks trying to slash their shipping loans as they cut their balance sheets to become less risky, and tougher regulations require them to hold more capital, making loans less profitable.
Sources said bidders for the RBS loan included Bank of America as well as private equity and investment companies Tennenbaum Capital Partners and Oaktree Capital Management, who all declined to comment.
Separately, sources said private equity group Centerbridge Partners was also among the bidders. It could not be immediately reached for comment.
The range of pricing on offer on the Eagle Bulk loan was at a 15 to 20 percent discount, although a deal had yet to be concluded, sources said.
Sources said Bank of America was a leading contender to pick up the loan.
“For RBS this is too much of an exposure for one account and it is a good opportunity to offload it,” one shipping industry source said.
Eagle Bulk has faced tough market conditions as the shipping industry suffers one of its worst-ever downturns. In August, the company said if dry bulk freight rates did not improve the group could potentially breach loan covenants as early as the first quarter of next year.
Market sources say such a situation would likely bring the company back to the negotiation table with its lenders. Dry bulk freight rates have shot up in recent months, although Eagle Bulk’s stock is valued at around $80 million.
“RBS have been keen to get rid of the Eagle Bulk loan and this is part of their broader move to scale down in shipping. It’s not a core sector for them,” another shipping industry source said. (Reuters)