National Australia Bank (NAB) said it is selling loans worth £1.2bn to an affiliate of Cerberus Global Investors.
New York-based Cerberus is reputedly named after the three-headed hellhound of Greek mythology and is chaired by Dan Quayle, a former vice president of the United States.
NAB said the sale will generate a small gain for the group and release an estimated £127m of capital when settled.
Following the sale, the portfolio will be worth £836m, substantially lower than the original balance of £5.6bn when the run-off book was established.
NAB has made its exit from the UK a priority and is reviewing options, including a possible flotation.
Andrew Thorburn, chief executive of NAB, said: “This is an important step forward, effectively bringing closure to one of our legacy positions.
“The sale of these higher risk loans in the NAB UK CRE portfolio is another important milestone in our strategy of reducing our low returning legacy assets and sharpening our focus on our core Australian and New Zealand franchises.
“Pleasingly the remaining NAB UK CRE loans are largely strong performing loans, and we will look at other options to manage this small remaining portfolio.”
The sale reducing the higher risk loans in the portfolio by 93 per cent, according to NAB.
NAB said it will work with Cerberus on a smooth transition for impacted customers, including advance notice to allow customers to plan for the transfer.