The Government has announced that it has completed the £5 billion pound sale of the final chunk of its ‘bad bank’ comprising failed lenders Bradford & Bingley (B&B) and Northern Rock (NRAM0.
The Government says that the final sale constitutes a significant milestone in the work to achieve the government’s objective of returning the institutions brought into public ownership as a result of the 2007-2008 financial crisis to private ownership.
The sale was approved following a competitive auction process and will see B&B and NRAM, together with their remaining mortgages and loan portfolios, sold to a consortium comprising Davidson Kempner Capital Management LP (Davidson Kempner) and Citibank (Citi). The majority of the financing for the transaction is being provided by funds managed by Pacific Investment Management Company (PIMCO).
The Economic Secretary to the Treasury, John Glen, said “This sale represents a major achievement. At last March’s budget we promised to finally return B&B and NRAM to private ownership and we have done just that.”
“We are continuing to protect consumers while recovering significant amounts of the taxpayer money used to ensure financial stability during the financial crisis.”
Following the nationalisations of Northern Rock and Bradford & Bingley, UK Asset Resolution (UKAR) was formed in 2010 as a holding company for their closed mortgage books. A key element in selecting the successful bidder was the treatment of customers. As is the case in all UKAR asset sales, all bidders were required to agree to a robust package of customer protections before their bids were considered on the basis of other factors.
The sale brings to a close the Government’s ownership of the loans, with the taxpayer fully repaid and the legal and regulatory responsibility for the operating companies returned to the private sector.
The transaction will complete in two stages. The first stage is the sale of the loans to Citi which is expected to complete within the next few weeks. The second stage is the completion of the sale of the companies to Davidson Kempner, which is subject to the receipt of regulatory approvals and is expected to take place in the summer. At this point, Davidson Kempner will take ownership of B&B and NRAM, whose team of colleagues based in West Yorkshire will continue to be responsible for overseeing the service that customers receive.
Ian Hares, Chief Executive Officer at UKAR, said “UKAR’s objective is to facilitate the orderly wind-down of NRAM and B&B whilst treating customers fairly. This transaction marks the end of the government’s ownership of these companies and is a significant step towards the completion of that objective and I would like to thank all those who have been involved over the ten years since we were formed.”