July 18 U.S. private equity company J.C. Flowers is close to buying a portfolio of 450 million pounds ($682.8 million) of former Northern Rock loans from the British government, people familiar with the matter said.
The deal would mark an acceleration of the winding down of the loan book of Northern Rock, nationalised during the financial crisis, and a sign that private equity firms and other buyers are more willing to take a bet on buying such big books of loans.
J.C. Flowers will pay about 300 million pounds for the loans, which will be bought through its small regional lender, One Savings Bank, as part of a sale organised by UK Asset Resolution (UKAR). The details have not yet been finalised so could change, the sources said.
J.C. Flowers was not immediately available to comment.
UKAR is a so-called zombie bank that does not take new business and is winding down the loans of Northern Rock and Bradford & Bingley, also nationalised during the financial crisis. As mortgages and other loans are repaid, UKAR pays back the government.
UKAR has said it will accelerate the run-off by selling books of loans when it can. It is in talks to sell another portfolio of former Northern Rock loans, the sources said.
"In line with our stated strategy of winding down the loan book, we will talk to parties interested in acquiring elements of the companies' loan books," a UKAR spokesman said.
"As you'd expect, such negotiations are confidential. We will only ever sell for a price that preserves taxpayer value."
After being nationalised, Northern Rock's business was split into two companies. A 'good' bank that was open to new business was sold to Richard Branson's Virgin Money, while the book of old loans were handed over to UKAR to run down.
It sold 465 million pounds worth of mortgages to Virgin Money last July and said earlier this year it received a "steady stream" of interest from possible buyers, but few had been willing to match its price expectations.
This week private equity firm Lone Star teamed up with U.S. bank Wells Fargo to buy 5 billion pounds of UK property loans from Commerzbank, in one of the biggest deals for a book of loans since the financial crisis. That portfolio was sold for a 3.5 percent discount on the loan portfolio's book value.