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UPDATE 1-British mortgage lender Charter Court's auction abandoned-sources

(Adds details from sources, buyer names)

May 4 (Reuters) - An auction to sell Britain’s Charter Court Financial Services has been abandoned by the buy-to-let mortgage lender’s controlling investor as potential buyers were not willing to match the asking price, two sources told Reuters on Wednesday.

While hedge fund Elliott Associates was expecting about 400 million pounds ($580 million) for Charter Court, the bids came in lower, at about 350 million pounds, due to fears that business would suffer if Britain left the European Union, one of the sources familiar with the matter said.

Elliott has a 75 percent stake in Charter Court, which owns the Exact and Precise Mortgage brands.

The potential buyers had been aiming to insert a clause that would safeguard them against adverse changes in business conditions in case of a Brexit, both the sources said.

“None of us would buy it without a Brexit clause. We had no interest in the business in the event of an out vote,” one of the sources close to one of the bidders said.

Charter Court and Elliott declined to comment.

The appetite for acquisitions, especially those related to the housing market, have been dampened ahead of the June 23 vote. The Bank of England has noted the upcoming referendum was affecting business decisions and delaying investments.

Sky News first reported Elliott's decision to pull the auction that had attracted bids from buyout firms BC Partners, Varde Partners and Warburg Pincus. (bit.ly/21wdkL6)

BC Partners declined to comment on the report. Varde did not immediately comment, while Warburg Pincus could not be reached.

Elliot now intended to hold on to Charter Court for two or three years, before considering the option to take it public, one of the sources said. ($1 = 0.69 pounds) (Reporting by Esha Vaish in Bengaluru and Freya Berry in London; Additional reporting by Maiya Keidan and Vidya L Nathan; Editing by Savio D’Souza)

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