The book is made up of performing and non-performing residential mortgages alongside unsecured loans from Northern Rock Asset Management (NRAM), dubbed the ‘bad bank’ when Northern Rock split up its assets.
Cerberus paid £280m over the value of the book at 30 June 2015 when the deal was approved and has agreed to sell £3.3bn of the Northern Rock assets to TSB Bank. TSB will receive a random selection of the borrowers which will result in 34,000 joining the challenger bank.
UKAR is the holding company for NRAM and Bradford & Bingley plc which was formed on 1 October 2010. Its aim is to manage the closed mortgage books of both lenders to maximise value for UK taxpayers. The government bailout package for Northern Rock during the financial crisis was £21.7bn and £27bn for Bradford & Bingley.
UKAR has reduced its balance sheet by £73.5bn since its formation in 2010 from £115.8bn to £42.bn to date.
It expects to repay around £5.5bn of the NRAM government loan from the proceeds of the transaction.
This investment follows Cerberus’s acquisition of Capital Home Loans, a regulated specialist buy-to-let mortgage lender, that completed in July 2015.
John W. Snow, chairman of Cerberus, said: “Cerberus prides itself on having earned the trust of financial institutions and regulators across Europe, who recognise our expertise and significant experience in responsibly managing loan portfolios. Cerberus is committed to being good stewards of these assets, and to ensuring that borrowers continue to receive exemplary service and care. This portfolio is an important addition for Cerberus and further demonstrates our commitment to our European mortgage and real estate investment strategy.”