Date Announced: 11/13/2015
client: UK Financial Investments Limited
Status: Closed – 12/2015
Value: £13 billion Read the case study
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.