Private equity firms Lone Star, Cerberus Capital Management and Colony Capital are reportedly leading the race to buy Lloyds' £1bn Project Royal loan portfolio, according to a news report in UK magazine Costar. The deadline for the second round of bids is said to be November 28.

The portfolio is expected to fetch around £600 mln, including some £300 mln of senior debt to be provided by Goldman Sachs and Citigroup for both the Lone Star and Cerberus bids.

Colony Capital is understood to have held talks with UBS to provide senior debt, and can call upon financing from Lloyds and JPMorgan, which was appointed as sales agent on the loan portfolio.

The 35-strong loan portfolio consists of £1 bn worth of performing and non performing debt securitised against a mixture of office, retail and industrial assets Lloyds is looking to close the deal by the end of the year.