Rothesay leads race for £900m state-owned equity release loans

21-Sep-18


Rothesay Life is the frontrunner to buy the £900m equity release mortgage book from UK Asset Resolution, Sky News learns

One of Britain's biggest specialist life insurers has emerged as the frontrunner to buy a £900m mortgage portfolio from a Government agency, a decade after the state-backed bailout of Britain's banking sector.

Sky News has learnt that Rothesay Life, which was set up a decade ago, is the frontrunner to acquire the equity release mortgages from UK Asset Resolution (UKAR).

A deal, which could still be some weeks away, would mark a continuation of UKAR's efforts to shrink itself into non-existence, a process it hopes to conclude by 2021.

When it was established, UKAR largely consisted of mortgage loans issued by Bradford & Bingley and Northern Rock, both of which had to be nationalised.

The Treasury-backed agency said in June that it had launched a process to offload the equity release loans, which it added were "very different in nature to other loans on the book".

Rothesay, which bought a £12bn annuity portfolio from Prudential earlier this year, is one of the leading pension derisking specialists in Britain, having struck deals with British Airways, Rank, RSA and the Post Office since it was set up in 2007.

The pension risk transfer sector has exploded in terms of corporate demand in recent years as blue-chip companies havesought ways to insure their future retirement obligations.


It was unclear on Thursday whether Rothesay was in a formal period of exclusivity to buy the UKAR loan book.

In April, UKAR struck a £5bn deal to sell a portion of its portfolio to an investor group led by Barclays and which included Pimco, the world's biggest bond fund manager.

Cerberus, the hedge fund, has also been a purchaser of UK crisis-era loans, acquiring a £13bn portfolio of securitised mortgages in November 2015.

UKAR was formed by ministers in 2009 to house the remnants of Bradford & Bingley and Northern Rock.

The proceeds from the last sale were 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.

The return of the remaining sum marked another milestone in removing the legacies of one of the ‎worst financial crises in British history.

Last week's tenth anniversary of the collapse of Lehman Brothers underlined the continuing repercussions of the 2008 crash, with interest rates in most western economies still at historic lows.

The Treasury has sold a further chunk of shares in Royal Bank of Scotland this year, and the lender said on Thursday that a so-called directed share buyback could be used to further reduce the Government's stake in 2019.

Meanwhile, 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.