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Displaying: Financial Institutions Advisory

December 2015

£13 billion

Sale of an asset portfolio to affiliates of Cerberus Capital Management LP
Financial Advisor to UK Financial Investments Limited on UK Asset Resolution Limited’s sale of an asset portfolio to affiliates of Cerberus Capital Management LP

On November 13, 2015, UK Financial Investments Limited (UKFI) announced that UK Asset Resolution Limited (UKAR) would sell a £13.0 billion asset portfolio to Cerberus Capital Management LP (“Cerberus”). Moelis & Company acted as the financial advisor to UKFI on this record-breaking sale of mortgages which had been taken into public ownership nearly a decade earlier.

As part of the U.K.’s response to the financial crisis and in order to manage the Governments interventions, UKFI was set up in 2008. UKFI’s objective is to implement a strategy for realizing value for the government’s holdings over time in an orderly and active way, consistent with its view that it has no wish to be a permanent investor in U.K. financial institutions. UKAR was established in 2010 as a holding company to integrate the administration and servicing of the legacy mortgage businesses of NRAM (previously known as Northern Rock Asset Management plc) and Bradford & Bingley plc.

The UKAR portfolio sold to Cerberus in this transaction comprised of mortgages and unsecured loans from the legacy book of NRAM, the former Northern Rock mortgage business. This highly competitive process resulted in UKAR achieving a £280 million premium over book value. As part of the transaction, TSB Bank acquired £3.3 billion of mortgages and loans from Cerberus, adding 34,000 customers across the U.K.

The sale brought the total UKAR balance sheet reduction to £73.5 billion (63%) and meant that the government had exited over 85% of Northern Rock whilst delivering value-for-money for the taxpayer.

This marque transaction, completed in May 2016, received accolades from U.K. Chancellor George Osborne, who called it a “major milestone in clearing up the mess left by the financial crisis, with the sale of former Northern Rock mortgages.” It currently represents the largest financial asset sale ever by a European government.

December 2013

£1.5 billion

Recapitalizaton
Exclusive Financial Advisor to the Ad Hoc Committee of Lower Tier 2 Noteholders of The Co-operative Bank on its £1.5 billion recapitalization

On December 20, 2013, Co-operative Group Limited (the “Group”) and The Co-operative Bank p.l.c. (the “Bank”) completed the revised recapitalization plan for the Bank. The plan was announced on November 4, 2013 and included a Liability Management Exercise (the “LME”) structured for the different classes of bondholders and preference shareholders, a capital injection from the Group of £333 million, and a capital raise of £125 million underwritten by the Lower Tier 2 Noteholders (the “LT2 Group”). The plan enables the Bank to continue its unique mission as a UK bank committed to the values and ethics of the co-operative movement. The LME received overwhelming support from bondholders with 97.6% of lower tier 2 security holders and 99.9% of tier 1 and upper tier 2 security holders voting in favor. The recapitalization represents the first successful consensual creditor bank bail-in in the United Kingdom, without taxpayer support.

December 2010

$42 billion

Sale to Discover and $42.0 billion of associated asset sales to Sallie Mae and Citi
Financial advisor to the Special Transaction Committee of the Board of Directors of The Student Loan Corporation on the company’s sale to Discover and $42.0 billion of associated asset sales to Sallie Mae and Citi

On December 31, 2010, The Student Loan Corporation (“SLC,” NYSE: STU), a leading originator and servicer of student loans, and Citibank N.A. completed a series of transactions that allowed Citi to exit the student loan business and continue its strategic reduction of assets held in Citi Holdings. The transaction was structured in three parts including an agreement to sell SLC’s operating business and $4.0 billion in student loans to Discover Financial Services (NYSE: DSF). Separately, SLM Corporation (“Sallie Mae,” NYSE: SLM) agreed to acquire $28.0 billion of securitized federal student loans and related assets while Citi agreed to acquire $8.7 billion in federal and private student loans. Public shareholders of SLC were entitled to receive $30 per share, a 42% premium to SLC’s closing price on the last trading day prior to announcement. Moelis & Company acted as financial advisor to the Special Transaction Committee of SLC’s Board of Directors and issued a number of fairness opinions.

February 2010

€1.1 billion

Restructuring
Financial advisor to the Ad Hoc Steering Committee of €1.1 billion CMBS Noteholders of Fleet Street Finance Two on its financial restructuring

On February 24, 2010, Fleet Street Finance Two P.L.C. (“FSF2”) completed its debt restructuring and consequently became the first Commercial Mortgage Backed Securities (“CMBS”) Issuer in Europe to achieve an extension of the legal final maturity of its CMBS. FSF2 had issued its CMBS in 2006 as part of a €3.5 million financing of the properties of German retailers Karstadt and Quelle (“K&Q”). However, in the summer of 2009 K&Q became insolvent and a complex restructuring was required to avoid a liquidation. Moelis & Company acted as financial advisor to the Ad Hoc Committee of the €1.1 billion CMBS Noteholders of FSF2 in a deal that involved extending the CMBS maturity to stabilize the capital structure and allow Karstadt to exit insolvency and be sold to a new investor. In return for the extension, CMBS noteholders benefitted from increased margin, improvement of the cashflow waterfalls including increased amortization of the senior CMBS tranches and various structural enhancements which were implemented to defend the CMBS credit ratings. This was one of the first CMBS deals to be fully restructured in what is, following the explosion in structured finance deal size and complexity that took place during the credit boom, a new and intricate sector for European restructuring.