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Increasing activity among 'zombie companies' raises economic hopes

THE number of properties and loans coming up for sale from so-called zombie companies is encouraging the purchase of smaller property and debt portfolios and helping to free up capital, according to an insolvency lawyer.

Jamie McIntosh, a partner in the corporate restructuring arm at HBJ Gateley, pointed out there have been a number of large deals where investment funds have purchased loan books from major institutions.

One recent example was Ireland's National Asset Management Agency agreeing a €1.8billion sum with a Blackstone Real Estate Fund for the Project Tower portfolio while both Royal Bank of Scotland Lloyds Banking Group have offloaded a number of property related loans and assets.

However Mr McIntosh said those movements at the top of the market are now resulting in portfolios worth less than £100m coming up for sale and generating a great deal of interest.

And as lenders begin to shift more of their non-performing assets it should allow them to provide further lending.

Mr McIntosh said: "Lenders have provisioned for these liabilities on their books over a number of years, and there's now a tipping point in values which means they can look seriously at disposals to free up capital for other lending.

"The growing health of the economy in Scotland means there is now a significant opportunity for property investors, as well as for growing businesses in other sectors which need to access growth capital, so they can take advantage of the improved outlook.

"Where possible, lenders have been very proactive in restructuring facilities, but non-performing loans which have not been dealt with are now being passed into the hands of specialist asset managers to allow new money to come into the lending market."

Mr McIntosh suggested that the competition to buy into the distressed real estate market indicates an improving sentiment about where the economy is heading.

Jamie said: "These deals point to improving sentiment from investors and lenders alike — they wouldn't happen if investors didn't feel as though they could realise benefit from the transactions.

He added: "There has always been a feeling that there would have to be a turning point at which these assets would need to move, but a lot of lenders have deliberately moved very slowly on the lower level assets to preserve the value of their loan books and to give customers as much time as possible to restructure.

"Now that buyers are out there and have the will and finance to develop some of these assets, we're seeing that movement of assets starting to happen.

"Investors in Scotland can theoretically have their pick of billions of pounds worth of property assets, and for as long as the market continues to pick up then the returns will be there."

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