Newly-Listed TSB Says Yes To £1.4bn UKAR Bid

State 'Bad Bank' Plots £1.5bn Mortgage Sale

Updated: 3:07pm UK, Tuesday 03 June 2014

By Mark Kleinman, City Editor

The state-owned 'bad bank' which holds the remnants of Bradford & Bingley and Northern Rock is to sell a £1.5bn mortgage portfolio that will attempt to exploit buoyant demand for UK housing market assets.

Sky News has learnt that UK Asset Resolution (UKAR) has hired investment bankers at Credit Suisse to market the loans, with the agency understood to be determined to secure a sale price at close to or better than the book's par value.

Prospective buyers are likely to include investment funds and a number of UK high street lenders, sources said on Tuesday.

The auction will represent the first such transaction since July 2012, when UKAR agreed the sale of £465m of Northern Rock Asset Management (NRAM) mortgages to Virgin Money.

The proceeds of that sale were used to repay part of NRAM's loan from the Government, which enabled it to stave off outright collapse in 2008.

Since then, the most significant deal involving UKAR took place last year, when NRAM's portfolio of standalone unsecured personal loans was sold to OneSavings Bank plc and Marlin Financial Group for a combined price tag of £400m.

News of the latest sale process emerged on the day that UKAR trumpeted its return to the taxpayer of roughly a quarter of the £38.3bn loan it took on six years ago.

Richard Banks, UKAR chief executive, said the results represented "good progress" for the taxpayer-backed organisation.

"It is also pleasing to see the significant reduction in arrears due to the dedication and professionalism of colleagues proactively working with our customers to help them achieve the right outcomes."

He went on to warn, however, that the prospect of rising interest rates would be a significant obstacle for many of its 467,000 customers.

"The signs are that the UK economy is continuing to recover, both in terms of growth and employment and in the housing and mortgage markets," UKAR said.

"House prices have increased faster than expected over the past 15 months, which, combined with continued low rates of interest, is good news for our customers and has driven increased redemption activity.

"However, despite the more positive conditions, many households continue to be under financial pressure. This, together with the prospect of interest rate rises and higher mortgage payments, will be a concern for many of our customers."

That warning echoes those of leading public figures in recent weeks, with representatives of major housebuilders due to meet Vince Cable, the Business Secretary, and George Osborne, the Chancellor, this week.

UKAR declined to comment on the new mortgage sale.

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