Asset realisations

On 2 April 2019, UK Asset Resolution Limited (UKAR) confirmed that it had agreed the sale of two separate portfolios of residential owner-occupied mortgages and unsecured loans for a total of £4.9 billion. Citi was the purchaser, with the majority of financing for the transaction provided by PIMCO.

UKGI provided a combination of corporate finance and civil service expertise to help achieve an open and competitive process that delivered value for money for the UK taxpayer, whilst also managing wider issues that represented a risk to the sale process and government.

One such issue was the continued fair treatment of customers, a key consideration in selecting the successful bidder. UKGI, working with UKAR and HM Treasury, engaged with the Financial Conduct Authority (FCA) to agree a package of customer protections that bidders were required to adhere to before their bids would be considered. Stipulations of the package ensured that customers would retain the current terms and conditions of their loans following the transaction, as well as retaining the same protections for the lifetime of the mortgages as under UKAR ownership without affecting their ability to re-mortgage.

As a result, the sale achieved UKGI and HM Treasury’s objectives of selling the portfolios at a competitive price, while also ensuring customers holding the loans were protected.

The £4.9 billion raised from the sale was used to fully repay the loans provided by the Treasury to NRAM and Bradford & Bingley plc (B&B) during the financial crisis and reduce public debt.

£1.7 billion raised by new asset class 

In December 2017, on behalf of the Department for Education (DfE), UK Government Investments (UKGI) successfully completed the first sale of part of the pre-2012 (Plan One) English student loan book. As well as ensuring value for money to the taxpayer, the transaction – which raised £1.7bn – sought to ensure the position of all borrowers would not change as a result of the sale.

Structured as a multi-tranche securitisation backed by loans with income contingent repayments, this was a world first and launched an entirely new asset class in the capital markets. The capital structure included 3 rated bonds and 1 unrated, with unique and innovative characteristics tailored to the long-term nature of the underlying loans, each designed to appeal to specific pools of capital and attracted significant demand.

This was the first in a programme of sales anticipated to raise approximately £12bn of proceeds, which UKGI is leading on behalf of DfE. UKGI’s model of combining public and private sector expertise has produced a multi-disciplinary transaction team uniquely placed to deliver this complex and innovative project.

GIB green mission continues after sale delivers £2.3 billion to UK government

In August 2017, UKGI, on behalf of the Department of Business, Energy and Industrial Strategy, successfully completed the sale of the Green Investment Bank (GIB) to Macquarie Group Limited. The £2.3bn transaction returned all the taxpayer funding invested in GIB since its creation, including set-up costs, and generated a profit of around £186m.

The UKGI team managed the transaction through a competitive process and led the complex negotiations to ensure that the government’s sale objectives were achieved. As well as securing value for money for the taxpayer, UKGI led the legislative process to remove GIB from the government’s balance sheet so that GIB could benefit from raising funds externally, a key transaction and policy objective.

As part of the acquisition negotiations, Macquarie made a series of commitments which mean that GIB’s green mission will continue in the private sector. Macquarie committed to investing £3 billion in green energy projects over the next three years, operating in accordance with GIB’s established green purpose of advancing the UK’s commitment to the low carbon economy.

UKGI was instrumental in the creation and development of the GIB, the first institution of its kind. Launched in 2012, GIB has been a significant success story, supporting 100 green infrastructure projects in the UK under government ownership. For every £1 it has invested, it has attracted approximately another £3 of third party capital, so attracting new investors to the green infrastructure market.