UK Asset Resolution announces successful sale of £13bn assets
13 Nov 2015
After a highly competitive six month bidding process, UK Asset Resolution Limited (UKAR) confirms that it has agreed to sell a £13bn asset portfolio to affiliates of Cerberus Capital Management LP (Cerberus).
The sale comprises performing and non-performing residential mortgages and unsecured loans from the legacy book of NRAM, the former Northern Rock mortgage business. It is based on the portfolio position as at 30 June 2015, from which point the buyer acquired the risks and rewards of ownership.
UKAR was advised in the process by Credit Suisse International, a subsidiary of Credit Suisse AG.
- Total portfolio of £13bn includes £12bn of loans within the Granite securitisation vehicle, plus a further £1bn of non-Granite assets.
- Proceeds include a c£280m premium over book value at 30 June 2015 and delivers value for money for the taxpayer.
- Cerberus have indicated their intention that the management of these assets will remain with the mortgage servicing arm of UKAR.
- The sale brings the total UKAR balance sheet reduction to £73.5bn (63%) since formation in 2010.
- We expect to repay c£5.5bn of the NRAM Government loan as a result of this transaction.
A key consideration for UKAR in selecting the successful bidder was the continued fair treatment of customers. There will be no changes to the terms and conditions of the mortgages involved in this transaction and all customers impacted will be contacted directly in due course to explain the change of ownership. Customers do not need to take any action.
Richard Banks, Chief Executive Officer of UKAR, commented:
“The sale of this £13bn loan book is a significant step in accelerating the repayment of our government loans and demonstrates our continuing success in maximising value for taxpayers. I am also delighted UKAR will continue to service these loans.”
NOTES TO EDITORS
Granite is a residential mortgage backed securitisation programme established by Northern Rock in 2001. It allowed Northern Rock to fund its mortgage book by selling securities to institutional investors. The structure is owned by a trust.
As at June 2015, Granite held £12.04bn of mortgage loans funded by 167 securities with a total balance of £7.50bn. The balance of £4.54bn is funded by NRAM.
The transaction is expected to enable UKAR to repay c£5.5bn of the NRAM Government loan (£4.54bn of NRAM funding within Granite, plus the additional £1bn of loans that are included in the sale).
Mortgages beneficially owned by Granite are serviced by NRAM in exactly the same way as all of NRAM's mortgages.
Due to the complex nature of the Granite securitisation, the transaction has been structured in such a way that, subject to regulatory approval, Cerberus will purchase NRAM plc.
Assets and liabilities not included in the transaction will be transferred from NRAM plc to a newly established subsidiary of UKAR, currently known as NRAM (No.1) Limited. Following completion of the transaction Cerberus will change the name of NRAM plc and UKAR will change the name of NRAM (No.1) Limited to NRAM ltd.
Cerberus has decided to refinance the Granite assets. This involves buying the £12.04bn mortgages out of Granite, which will then be wound up. The outstanding securities will be repaid in full.
Cerberus has also agreed to sell £3.3bn of the assets to TSB Bank plc.
UK Asset Resolution Limited (UKAR)
UKAR, the holding company for NRAM plc (NRAM) and Bradford & Bingley plc (B&B), was established on 1 October 2010 to facilitate the orderly management of the closed mortgage books of both B&B and NRAM to maximise value for taxpayers, while ensuring that both companies continue to treat customers fairly, deliver consistently high levels of service and support those customers facing financial difficulty. Further information about UKAR is available at www.ukar.co.uk.
Cerberus Capital Management, L.P.
Cerberus Capital Management, L.P. has been an active investor in real estate loans for more than 20 years.
Cerberus has an established global track record for professional and responsible asset management, The firm has more than US $28 billion under management through multiple investment strategies in countries around the world.
This investment follows Cerberus’s acquisition of Capital Home Loans Limited, a regulated specialist Buy to Let mortgage lender, that completed in July 2015.
Credit Suisse AG
Credit Suisse AG is one of the world's leading financial services providers and is part of the Credit Suisse group of companies (referred to here as 'Credit Suisse'). As an integrated bank, Credit Suisse offers clients its combined expertise in the areas of private banking, investment banking and asset management. Credit Suisse provides advisory services, comprehensive solutions and innovative products to companies, institutional clients and high-net-worth private clients globally, as well as to retail clients in Switzerland. Credit Suisse is headquartered in Zurich and operates in over 50 countries worldwide. The group employs approximately 46,600 people. The registered shares (CSGN) of Credit Suisse's parent company, Credit Suisse Group AG, are listed in Switzerland and, in the form of American Depositary Shares (CS), in New York. Further information about Credit Suisse can be found at www.credit-suisse.com.