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Cleaning up: Linklaters and Slaughters advise on record-breaking disposal of Northern Rock mortgages

Linklaters and Slaughter and May have landed major roles advising on the government’s record-breaking £13bn sale of former Northern Rock mortgages acquired during the financial crisis.

Announced this morning (13 November) by the Treasury, the mortgages originally owned by Northern Rock are being sold by UK Asset Resolution (UKAR) – set up to look after the mortgages nationalised when Northern Rock and Bradford & Bingley ran into difficulty in 2008 – to Cerberus Capital Management, in what is the largest-ever financial asset sale by a government in Europe.

UKAR is selling this portfolio of mortgages for £280m more than their book value, demonstrating the strength of global investors’ interest in the UK.

In a statement UKAR said taxpayers will get back more money from Northern Rock than they were ‘forced to put in during the financial crisis’, and today’s sale means the government has exited over 85% of the assets of the former bank. All proceeds will be used to pay down the national debt. 

Slaughter and May advised UKAR with a team led by finance partner Guy O’Keefe and corporate finance partner Craig Cleaver. O’Keefe told Legal Business: ‘The deal involved a high degree of overlap on financial regulatory and competition law issues, with bespoke state aid considerations to navigate through.’

The firm had previously advised the Treasury, its longstanding client, on the transfer of Northern Rock and Bradford & Bingley into public ownership in 2008.

Allen & Overy advised the financing banks in respect of the agreement by Cerberus to acquire the mortgages from UKFI, which manages Treasury’s 100% share in UKAR. The team was led by securitisation partner Salim Nathoo, and included banking partners Trevor Borthwick and Ian Powell, corporate partner Annabelle Croker, real estate partner Dan Mckimm and tax partner Lydia Challen.

Linklaters advised Cerberus with a team led by structured finance partner Adam Fogarty and corporate partner Tracey Lochhead.

Cerberus is subsequently selling on £3.3bn of the portfolio to TSB, advised by Hogan Lovells with a London-based team led by partners John Allison, Jon Chertkow and Rachel Kent.

Chancellor George Osborne said: ‘Today marks another major milestone in clearing up the mess left by the financial crisis, with the sale of former Northern Rock mortgages. The sale is the largest ever sale of financial assets by a British government. The highly competitive process, unprecedented scale, and the fact that these mortgages have been sold for almost £300 million more than their book value demonstrates the confidence investors have in the UK, which has only been made possible by the success of our long term plan.’