Lloyds sells $1.6-bn private equity assets to Coller

Lloyds Banking Group Plc, the UK’s second-biggest state-backed lender, agreed to sell private equity-related investments for £1.03 billion ($1.6 billion) as it shrinks following its 2008 bailout.

The sale of the portfolio, which had losses of £40 million in 2011, to a fund financed by British private-equity investor Coller Capital Ltd, will result in a pretax gain for Lloyds after it reverses a provision, the London-based bank said in a statement today. The group will continue to manage the fund in exchange for a fee, probably less than £10 million a year, it said.

Lloyds Chief Executive Officer Antonio Horta-Osorio is selling assets after the bank received a £20.3 billion rescue following the 2008 credit crisis. Revenue and profit margins are being squeezed as the UK economy contracts and the Bank of England holds its key interest rate at a record low.

Record transactions
Lloyds valued the private-equity portfolio at £1.05 billion and the sale also includes the transfer of undrawn commitments of £220 million, the bank said. The buyer, Coller International Partners VI, is a fund started by London-based Coller Capital to buy private-equity portfolios from investors who want to free capital. Banks have been selling such holdings because the assets need more capital under new regulations.

Coller’s competitors include New York-based Lexington Partners Inc. and Paris-based Axa Private Equity, which in June raised $7.1 billion, the largest of such funds.

Secondary private-equity transactions rose to a record of about $25 billion in 2011 and are projected to stay at that level this year as banks and insurers unload assets, according to a January report by Cogent Partners, a New York-based advisory firm.

Lloyds started a so-called non-core division after its bailout to house assets that it plans to sell or wind down. The bank shrank the division by £44.9 billion to £117.5 billion in the year through June. The lender plans to reduce non- core assets to less than £70 billion by the end of 2014.