Cerberus Buys $20 Billion Loan Portfolio From Nationalized U.K. Banks -- 3rd Update
13 November 2015 - 9:40PM
Dow Jones News
By Ian Walker
The British government said Friday it is unloading a big portion
of the assets it acquired in the financial crisis with the GBP13
billion ($19.93 billion) disposal of bank loans to private-equity
firm Cerberus Capital Management L.P.
The transaction marks the biggest sale of financial assets by a
European government, U.K. Chancellor George Osborne said in a
statement.
The sale comes as Mr. Osborne is undertaking a wider push to
privatize state-owned assets, selling down the stake in Royal Bank
of Scotland PLC and nearing the sale of its remaining shares in
Lloyds Banking Group PLC.
The portfolio of loans bought by Cerberus were taken on by the
government after it nationalized Northern Rock and Bradford &
Bingley, another midsize U.K. lender, in 2008. Northern Rock was
the first English lender to suffer a bank run in 150 years in the
credit squeeze in the fall of 2007. Both lenders were undone by
their reliance on short-term funding.
U.K. Asset Resolution Ltd., which managed the assets from the
nationalized banks on the government's behalf, said it sold the
loans at GBP280 million more than book value and will repay EUR5.5
billion to the U.K. government following the deal.
Cerberus plans to manage the assets through UKAR's mortgage
servicing arm, UKAR said. Cerberus has also agreed to sell GBP3.3
billion of the assets to U.K. lender TSB Bank PLC.
"The sale of this GBP13 billion loan book is a significant step
in accelerating the repayment of our government loans," said U.K.
Asset Resolution Chief Executive Richard Banks.
The transaction leaves the state-owned entity with assets of
GBP73.5 billion, a 63% fall since its creation in 2010.
Low interest rates, rising property prices and an improving
economic environment have boosted the value of the loans the U.K.
government acquired via the bailouts of British banks. They have
also attracted yield-hungry investors to the portfolios held by
government-owned vehicles charged with getting rid of banks'
unwanted loans, property and other assets.
"The vast majority of the customer base are paying their
mortgages," said Mr. Banks. He said UKAR had no new immediate plans
to sell further tranches of loans.
"This portfolio is an important addition for Cerberus and
further demonstrates our commitment to our European mortgage and
real-estate investment strategy," said Cerberus Chairman John Snow
in a statement.
The government had appointed Swiss bank Credit Suisse in
November last year to conduct a review of options to accelerate
repayment of the government loans. Morgan Stanley advised Cerberus
in the acquisition of the U.K. assets.
--Ian Walker contributed to this article
Write to Max Colchester at max.colchester@wsj.com
(END) Dow Jones Newswires
November 13, 2015 05:25 ET (10:25 GMT)
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