Cerberus Capital Management has emerged as the buyer of a portfolio of mortgage loans and other loan assets with a face value of £13 bn (€18.5 bn) from government-owned UK Asset Resolution Limited (UKAR) and NRAM, the former Northern Rock mortgage business.
Cerberus Capital Management has emerged as the buyer of a portfolio of mortgage loans and other loan assets with a face value of £13 bn (€18.5 bn) from government-owned UK Asset Resolution Limited (UKAR) and NRAM, the former Northern Rock mortgage business.
The package was sold through a share deal after 'a highly competitive six month process' with bidders said to include Goldman Sachs, RBS, Sabadell and Blackstone. It comprises £12 bn of performing and non-performing residential mortgages in the securitisation vehicle known as Granite as well as other legacy mortgages of NRAM. The deal is the biggest of its kind so far this year.
The vendor said a key consideration in selecting the successful bidder was the 'continued fair treatment of customers', which will not be affected by the sale as there will be no changes to the terms and conditions of the mortgages involved.
'The sale of this £13 bn loan book is a significant step in accelerating the repayment of our government loans and demonstrates our continuing success in maximising value for taxpayers,' said Richard Banks, CEO of UKAR.
'This portfolio is an important addition for Cerberus and further demonstrates our commitment to our European mortgage and real estate investment strategy,' commented John W Snow, chairman of Cerberus Capital Management. As part of the deal, Cerberus has also agreed to sell £3.3 bn of the assets to TSB Bank.
The sale price reflects a £280 mln premium over the portfolio's book value at 30 June 2015, UKAR said in a statement. The company expects to repay £5.5 bn of the NRAM government loan as a result of this transaction, it added. UKAR, which was advised by Credit Suisse International on the deal, has sold 37% of its balance sheet since formation in 2010 and it currently owns £73.5 bn of assets.
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.
UKAR took on the securitised mortgages after Northern Rock was broken up following its high-profile collapse in 2007.
As at June 2015, Granite held £12 bn of mortgage loans funded by 167 securities with a total balance of £7.5 bn. The balance of £4.50 bn is funded by NRAM.
Cerberus will retain the mortgage servicing arm of UKAR to manage the assets.
UKAR, the holding company for government-owned NRAM and Bradford & Bingley, 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.