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Contingent Liability Notification and Disclosure of Asset Sale

Volume 690: debated on Monday 1 March 2021

I can confirm today that I have laid a Treasury Minute informing the House of certain liabilities that HM Treasury has taken on in authorising the sale of the remaining loan assets and share capital of Bradford & Bingley plc (B&B) and NRAM Limited.

This sale generates proceeds of £5.0 billion for the Exchequer, and will see NRAM, B&B and their subsidiary companies, including Mortgage Express (MX), together with their remaining mortgages and loan portfolios, sold to a consortium comprising Davidson Kempner Capital Management LP (Davidson Kempner) and Citibank (Citi). The majority of the financing for the transaction is being provided by funds managed by Pacific Investment Management Company LLC (PIMCO).

The transaction has been agreed and will complete in two stages. The first stage is the sale of the loans to Citi which is expected to complete within the next few weeks. The second stage is completion of the sale of the companies, and will see the sale of the legal entities of B&B and NRAM to Davidson Kempner. This stage is subject to the receipt of regulatory approvals from the Financial Conduct Authority (FCA)and is expected to take place in the summer.

This sale constitutes a significant milestone in the work to achieve the Government’s aim of returning the institutions brought into public ownership as a result of the 2007-2008 financial crisis to private ownership.


It is Government policy that where a Government asset no longer serves a public purpose, or that purpose can be more efficiently realised with the asset in private ownership, the Government may choose to sell that asset, subject to value for money and market conditions being supportive.

The Government intervened in the financial sector to preserve financial stability. As this policy objective has now been met, those assets which came into public ownership should be returned to the private sector.

Format and Timing

The Government, UK Asset Resolution (UKAR) and UK Government Investments (UKGI) concluded that this sale achieves value for money having:

Conducted a rigorous analysis of whether market conditions were conducive for the sale of this portfolio:

considered whether the transaction had generated sufficient competitive tension to lead to a properly competitive process; and

conducted an assessment of the fair market value for the assets, including the legal entities of B&B and NRAM.

The sale made use of a structured bidding process, which has been shown to create competitive tension and has been used for previous Government asset sales.

Customer protections:

A key element in selecting the successful bidder was the treatment of customers. As in previous UKAR asset sales, bidders were required to agree to a robust package of customer protections before their bids were considered on other factors.

Customers do not need to take any action and can be assured that there will be no changes to the terms and conditions of any loans as a result of this transaction. They will continue to receive the same protections for the lifetime of their mortgage as they do today, and their right to re-mortgage will be unaffected.

The structure of this transaction also means that the legal title holder and administrator of customers’ loans will not change at the point of sale. B&B, NRAM and MX will remain the legal title holders of the loans. Computershare will continue to service the loans.

Only the beneficial owner will change as a result of this sale, and the beneficial owner does not have an active role in the management of customers’ loans.

B&B, NRAM, MX and Computershare are all regulated by the FCA. This means that customers will continue to enjoy the protections of the FCA’s Treating Customers Fairly(TCF)principles and its Mortgages and Home Finance: Conduct of Business(MCOB)rules, as well as recourse to the Financial Ombudsman Service.

As the customer protections require that the administrator and legal title holder of these loans will always be an FCA-regulated entity, customers will continue to enjoy the protection of the FCA’s rules if the legal title holder of their loans changes again at some point in the future.

Contingent Liability

On this occasion, due to the sensitivities surrounding the commercial negotiation of this transaction, it was not possible to notify Parliament of the particulars of the contingent liabilities in advance of the sale announcement.

The contingent liabilities HM Treasury is taking on include those which relate to certain warranties and indemnities that were given to the purchasers and which confirm regulatory, legislative and contractual compliance relating to the loans, assets and the share capital of the companies. The maximum contingent liability arising from the warranties and indemnities to the loan assets is approximately £4.9 billion.

The maximum contingent liability arising from the warranties and indemnities relating to the share capital of the companies is c.£290 million—100% of the purchase price of the shares. More information on these contingent liabilities has been set out in a Departmental Minute that has been laid before the House alongside this statement.

Fiscal Impacts

The impacts on the fiscal aggregates, in line with fiscal forecasting convention, are not discounted to present value. The net impacts of the sale on a selection of fiscal metrics are summarised as follows:



Sale proceeds

c. £5.0 billion

Hold valuation

Net present value of the assets if held to maturity using Green Book assumptions

The price achieve this above the hold value range.

Public Sector Net Investment


Decreased by:

Current budget

£350 million in 2024-25

Increased by:

Public Sector Net Borrowing

£350 million in 2024-25

Public Sector Net Debt

Reduced by £5.0 billion— £4.4 billion in 2020-21 and £0.6 billion in 2021-22

Public Sector Net Liabilities

Increased by £100 million in 2020-21

Public Sector Net Financial Liabilities

Increased by £100 million in 2020-21