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UK Government Sells £13 Billion of Northern Rock Mortgages to Investment Firm

Strategic Insights

Nov 13, 2015 — 1 min read

The UK Government has successfully sold off £13 billion worth of Northern Rock mortgages to investment firm Cerberus Capital Management in a deal described as the largest ever asset sale by a European government. The sale, overseen by UK Asset Resolution (Ukar), includes residential mortgages and unsecured loans from the legacy book of Northern Rock Asset Management (NRAM). This move marks a significant milestone in the repayment of government loans, with Ukar expecting to repay around £5.5 billion as a result of the transaction.

Key Takeaways:

The sale of £13 billion worth of Northern Rock mortgages to Cerberus Capital Management represents the largest ever asset sale by a European government.
The deal includes residential mortgages and unsecured loans from the legacy book of Northern Rock Asset Management (NRAM).
Ukar expects to repay around £5.5 billion of the NRAM Government loan as a result of the transaction.
TSB Bank will take on £3.3 billion of the former Northern Rock mortgages and loans from Cerberus, becoming the lender to an additional 34,000 homeowners across the UK.
The sale marks a significant milestone in the repayment of government loans, with total Ukar balance sheet reduction now standing at £73.5 billion since its formation in 2010.
The sale brings the total value of assets offloaded by the Government to over 85% of those of the former bank.

Statistics:

£13 billion: The value of Northern Rock mortgages sold to Cerberus Capital Management
£280 million: The premium over book value at June 30 2015
£5.5 billion: The amount Ukar expects to repay of the NRAM Government loan
£3.3 billion: The value of former Northern Rock mortgages and loans taken on by TSB Bank from Cerberus
34,000: The number of additional homeowners across the UK who will be serviced by TSB Bank as a result of the deal
£73.5 billion: The total Ukar balance sheet reduction since its formation in 2010

Sources:

Damian Clarkson, "Treasury sells £13bn of Northern Rock mortgages" The Press Association (no date cited)

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