Asset realisations

Return of Bradford & Bingley and NRAM Limited to private ownership

On 26 February 2021, UK Asset Resolution (UKAR) agreed the sale of the issued share capital and remaining mortgage and loan portfolios of Bradford & Bingley plc and NRAM Limited and their subsidiary companies in a transaction worth around £5 billion. The buyer comprised a consortium of Citibank and Davidson Kempner, with funding provided by PIMCO.

This was a particularly significant sale as it brings to a close the government’s ownership of the assets acquired from its interventions in Northern Rock and Bradford & Bingley during the financial crisis of 2007-08, with the taxpayer fully repaid.
UKGI worked with both UKAR and HM Treasury on the sale, providing expertise to help devise and implement a strategy that delivered government’s objectives and achieved value for money.

In addition to returning taxpayer funds to the Exchequer, a key consideration for the sale was the continued fair treatment of customers, as it has been in previous sales. The transaction results in a change in ownership of B&B and NRAM but does not involve any of their 29,000 customers moving to a new lender. There will be no changes to the terms and conditions of any loans as a result of this transaction and borrowers will continue to receive the same protections for the lifetime of their mortgage as they currently receive under UKAR ownership.

£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.

Successful execution of off-market share sale

As set out at Budget 2021, the government intends to fully dispose of the NatWest (formerly Royal Bank of Scotland Group plc) shareholding by 2025-26, subject to market conditions and any sale achieving value for money. The considerable economic impact and uncertainty caused by COVID-19 had a significant effect on global financial markets and prevented any realistic opportunities for UKGI to transact during 2020.

On 19 March 2021, UKGI successfully executed the disposal of approximately £1.1bn worth of NWG shares, representing 4.86% of the company, by way of a directed buyback transaction. A total of c.591m shares were sold at the 18 March 2021 closing market price of 190.5p per share. The reduction in the government’s shareholding is less than the percentage sold following the cancellation of shares by NatWest. Following this transaction, the government’s shareholding decreased to 59.8%*.

This innovative structure represents the first sale of shares via an off-market share sale directly to the company undertaken by the government. UKGI supported HM Treasury by designing, developing and implementing the transaction. As a result, the government, supported by UKGI’s advice, delivered a successful transaction which represented value for money.

The sale represents an important step in the government’s plan to return institutions brought into public ownership as a result of the 2007-2008 financial crisis to private ownership.

*Following a subsequent transaction on 10 May it decreased to 54.8%