Blackstone, Prudential Said to Win in $16 Billion Loan Sale

  • U.K. agency seeks to offload assets from Bradford & Bingley
  • B&B mortgages held by government mostly buy-to-let loans

Blackstone Group LP and Prudential Plc were picked as preferred bidders for about 12.5 billion pounds ($16 billion) of U.K. mortgages made by failed lender Bradford & Bingley, according to two people with knowledge of the matter.

The New York private-equity giant and London-based insurer were among winners in a contest overseen by U.K. Asset Resolution Ltd., a state agency, said the people, who asked not to be identified because the information is private. Cerberus Capital Management, CarVal Investors LLC and Elliott Management Corp. were among other firms to place bids, people familiar said in December.

The deal, probably the last major sale of mortgages from U.K. lenders nationalized during the 2008 financial crisis, forms part of the government’s push to raise funds by offloading bailed-out banking assets. U.K. banks may also benefit as a sale could save them hundreds of millions of pounds on an industrywide levy.

Andrew Dowler, a spokesman for Blackstone, declined to comment, as did a spokesman for Prudential.

"We do not comment on rumor or speculation,” UKAR said in a statement e-mailed on Saturday. “This process is confidential and we are contractually obliged to maintain that confidentiality.”

Offloading the loans will cut UKAR’s assets to about 24 billion pounds, a near 80 percent reduction in the agency’s balance sheet since it first took on mortgages from Bradford & Bingley and fellow defunct lender Northern Rock in 2010. Cerberus bought a record 13 billion pounds of Northern Rock mortgages in 2015.

Chancellor of the Exchequer Philip Hammond restarted the disposal process in October after halting it following the nation’s June 23 vote to leave the European Union. Hammond is following in the footsteps of his predecessor George Osborne in seeking to dispose of banking assets acquired during the crisis.

The U.K.’s largest banks have made preparations to help finance the sale of the Bradford & Bingley mortgages, of which about 70 percent are buy-to-let loans. The industry has paid more than 2 billion pounds to the Financial Services Compensation Scheme since 2009 to cover interest on a loan that funded the 2008 rescue of Bradford & Bingley.

A month after Cerberus was selected as the preferred bidder for the Northern Rock mortgages, UKAR announced the sale had completed.

— With assistance by Richard Partington

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