UK Asset Resolution announces £860 million sale of a portfolio of equity release loans

UK Government Investments (UKGI) today confirms that following an open and competitive sales process, UK Asset Resolution Limited (UKAR), the holding company for the government-owned businesses of Bradford & Bingley plc (B&B) and NRAM Limited (NRAM), has agreed to sell an £860 million equity release mortgages portfolio to Rothesay Life, a Financial Conduct Authority and Prudential Regulation Authority regulated firm.

These mortgages were acquired by the taxpayer during the financial crisis and their sale simplifies the books of both B&B and NRAM, making further progress towards the final wind-down of these companies.

The value achieved for the portfolio of mortgages represents a premium to the book value following a highly competitive auction. This is within the fair value range of UKGI for the portfolio of assets and represents value for money for the taxpayer.

There will be no changes to the terms and conditions of the mortgages sold. Borrowers do not need to take any action and will be contacted directly in due course to explain the change of ownership.

UKAR, the holding company for B&B and NRAM, will also terminate interest rate swaps at the same time, which hedge the risk of changes in interest rates, held against these mortgages. These swaps were taken out by B&B and Northern Rock more than ten years ago when the loans were issued, in line with good risk management practice. Due to the fall in long-term interest rates, there is a cost for terminating the swaps which is expected to exceed the profit on the sale of the loans, resulting in a net overall accounting loss on the two transactions.

Financial completion is expected within the next few weeks. As a result of this transaction, UKAR expects to repay approximately £1 billion of the Government loan which is made up of a number of components in addition to the sales proceeds. Following repayment, UKAR will have repaid 94% of their loans from the Government.

Subsequent to today’s transaction, UKAR will own £13 billion worth of assets, down from £21 billion in September 2017 and from £116 billion in 2010.

Further information can be found in the HM Treasury and UKAR press releases:

Notes to Editors:

  • UKGI was independently advised by Moelis on the divestment.