U.K. Finally Exits Northern Rock After 2008 Crisis Bailout

(Bloomberg) -- More than a decade after the bank run that toppled Northern Rock Plc, the British government has sold the final parcel of assets acquired during its bailout.

The U.K. Treasury said Friday that the government had raised 5 billion pounds ($7 billion) by selling all its remaining Northern Rock loans, as well as those of Bradford & Bingley Plc, another lender that came unstuck during the financial crisis that began in 2007.

Northern Rock was Britain’s fifth largest mortgage lender and grew rapidly by borrowing short-term to fund longer-dated home loans, but was undone when global money markets began to freeze. When it emerged that the bank had received emergency support from the Bank of England, panicked customers raced to withdraw their money, sparking the first run on a British institution in more than a century.

The business was nationalized in 2008 and most of its lending portfolio fell under the remit of a new state agency, U.K. Asset Resolution Ltd., which wound down and sold off its assets. Northern Rock’s operating business was sold in 2011 to Virgin Money Plc, the lender founded by British billionaire Richard Branson.

A consortium comprising Davidson Kempner Capital Management LP and Citigroup Inc. bought the final slug of Northern Rock and Bradford & Bingley loans, according to the Treasury’s statement Friday. The majority of the financing for the deal is being provided by Pacific Investment Management Company LLC.

“This sale represents a major achievement,” said John Glen, economic secretary to the Treasury. “We are continuing to protect consumers while recovering significant amounts of the taxpayer money used to ensure financial stability during the financial crisis.”

At its peak, UKAR managed more than 100 billion pounds. While its staff are all moving to the new owners of the loans, UKAR will continue to exist under an outsourcing deal with PricewaterhouseCoopers LLP to service “ongoing contractual obligations” to the buyers.

The U.K. is not entirely free from its banking bailouts: through a separate agency, the government still owns about 62% of NatWest Group Plc, which was named Royal Bank of Scotland when it was rescued.

©2021 Bloomberg L.P.