UK Asset Resolution (UKAR), the government-mandated ‘bad bank’, has sold assets of former UK bank Bradford & Bingley (B&B) to Blackstone and Prudential for £11.8 billion.
Two separate portfolios of performing buy-to-let loans were sold in the transaction.
The mega-purchase was financed by a consortium made up of Barclays, HSBC, Lloyds, Nationwide, RBS and Santander UK.
The deal, which is expected to be completed in the next few weeks, will see total loan repayments to HM Treasury of £11.8bn including £10.9bn of the £15.65bn Financial Services Compensation Scheme (FSCS) loan.
A statement from the UKAR, the body set up in 2010 to manage deleveraging Bradford & Bingley and Northern Rock Asset Management’s portfolio of loans, said the price is at the “upper end of expectations”. The book value of the loans was £12.2 billion and interest at each loan was 2 percent.
The sale, UKAR said, was based on the portfolio position as at September 2016, from which point the buyers will acquire ownership of the 104,000 loans originated by Bradford & Bingley and Mortgage Express.
When B&B was taken into public ownership in 2008 its customer deposit book was transferred to Santander UK and replaced by loans from HMT Treasury and the FSCS, which in turn borrowed £15.65 billion from HM Treasury to fund its loan to B&B.
Ian Hares, chief executive officer at UKAR, said the price achieved delivered “excellent value” for the taxpayer.
“This sale of assets is a significant milestone in the phased repayment of the FSCS loan extended to Bradford & Bingley and when complete will reduce UKAR’s balance sheet to £22 billion from £116 billion in 2010 when it was formed,” said Hares.
“The transaction delivers against our overarching objective to develop and execute divestment strategies which protect and maximise value for the taxpayer whilst treating customers fairly,” added Hares.
Credit Suisse International acted as financial advisor to UKAR in the transaction.