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Updated deal watch: Hogan Lovells wins £40bn Student Loans Company debt sell off

Following a six-month tender process the Department for Business, Innovation & Skills (BIS) has appointed Hogan Lovells to advise on the sale of the £40bn Student Loans Company (SLC) debt portfolio.

In July BIS invited tenders for legal advice on the monetisation of the SLC’s loans portfolio, which is likely to take place either through a sale to the private sector or securitisation. Invited firms had until 23 August to submit their bids and BIS confirmed to Legal Business late on Friday 6 December that Hogan Lovells was ‘recently’ notified that it is the successful bidder.

The winning firm was expected to demonstrate their experience and capability in complex, cross-government work and corporate M&A and securitisation.

DLA Piper has acted as joint advisor to the government-owned SLC, alongside Scottish firm Harper Macleod after being reappointed as adviser for two years in February this year.

The tender announcement comes after Herbert Smith Freehills (HSF) at the end of November secured a prominent role advising the government body on the sale of a £160m tranche of loans, owed by a by a quarter of a million student borrowers, to debt management consortium Erudio Student Loans.

City-based HSF finance partner Michael Poulton led the legal team advising on the deal, with input from corporate partner Adrian Clough.

Having been announced in late November by BIS, the sale relates to the remaining 17% of mortgage-style loans taken out by students who undertook courses between 1990 and 1998.

Erudio Student Loans, a consortium formed by debt collectors Arrow Global and private equity firm CarVal Investors, became the successful bidder through a competitive process, and its offer was ‘judged to represent the best value for money for the tax payer and the price paid exceeds the estimated value to the government of retaining the loans’, a November statement said.

It added that the private sector is ‘thought best placed’ to take the outstanding debt, enabling the Student Loans Company (SLC) to ‘concentrate on administering newer loans’.

Universities and science minister David Willetts said: ‘The sale of the remaining mortgage-style student loan book [helps] to reduce public sector net debt by £160m. The private sector is well placed to maximise returns from the book which has a deteriorating value.

‘The sale will allow the Student Loans Company to focus on supplying loans to current students and collecting repayments on newer loans. Borrowers will remain protected and there will be no change to their terms and conditions, including the calculation of interest rates for loans.’

PwC acted as the financial advisor to the BIS for the transaction.