Pimco seals £5bn swoop on taxpayer-owned mortgages
24 April 2018, 16:29
The world's biggest bond fund manager will this week seal the purchase of a £5bn portfolio of mortgages owned by British taxpayers, marking a fresh milestone in efforts to unwind the legacy of the 2008 financial crisis.
Sky News has learnt that Pacific Investment Management Co - better-known as Pimco - is expected to sign a binding contract to buy the residential mortgages from UK Asset Resolution (UKAR) as early as Wednesday.
An announcement is likely later this week.
The deal for two separate loan portfolios will generate a profit for taxpayers, according to banking sources.
The hedge funds Cerberus Capital Management, Och-Ziff and M&G; Prudential had also been shortlisted to buy the assets.
The sale of just over £5bn of assets will, like all major Government sell-offs, attract scrutiny from the National Audit Office.
Pimco, which is part of the German insurance giant Allianz, has bid during previous UKAR auctions, but lost out to rival bidders.
The line-up of potential buyers broadly mirrored earlier sale processes run by the agency, including an £11.8bn sale to Blackstone and Prudential last year.
Cerberus has also been a purchaser of UK crisis-era loans, acquiring a £13bn portfolio of securitised mortgages in November 2015.
Sky News revealed that Pimco was the leading bidder in March.
UKAR was formed by ministers in 2009 to house the remnants of Bradford & Bingley and Northern Rock.
The proceeds from the latest sale will be used to repay the outstanding £4.7bn of a Treasury loan to the Financial Services Compensation Scheme (FSCS), the interest on which is paid by major banks and building societies.
Almost £11bn of the original FSCS has been repaid.
The return of the remaining sum will mark another milestone in removing the legacies of one of the worst financial crises in British history.
Chancellor Philip Hammond said in his Budget in November that further disposals of Royal Bank of Scotland (RBS) shares would resume within about 18 months, although the timing will depend upon the lender reaching a settlement over its mis-selling of residential mortgage-backed securities.
That deal has appeared to be imminent for some time.
The majority of the £5bn-plus mortgages for sale during the current auction were issued by B&B;, while a smaller tranche relates to assets acquired from GMAC-RFC and Kensington Mortgages.
The Treasury has overcome an obstacle to the auction in the form of new rules imposed by Brussels relating to the inclusion of self-certified mortgages in securitisation vehicles.
The £20bn used to rescue Lloyds Banking Group has now been returned to taxpayers, generating a modest profit.
Tens of billions of pounds more has been yielded from the disposal of the customer base of Northern Rock to Virgin Money, and loans made by both it and B&B.;
Morgan Stanley, the Wall Street bank, has been handling the latest sale on behalf of ministers and UKAR.
Pimco and UKAR declined to comment on Tuesday.
(c) Sky News 2018: Pimco seals £5bn swoop on taxpayer-owned mortgages