Taxpayer to get further £538m from Northern Rock sale

By GARETH MACKIE
Published on 24/07/2012 00:00

THE taxpayer is set to receive a further £538 million from the sale of Northern Rock, the failed lender that was bought by Sir Richard Branson’s Virgin Money at the start of the year.

Edinburgh-based Virgin Money has already paid £747m for the mortgage bank, which was nationalised in 2008 after nearly collapsing during the credit crunch.

UK Financial Investments (UKFI), the body set up to manage the government’s stakes in bailed-out banks, yesterday said it has received an extra £73m in cash from the sale.

The payment, which relates to Northern Rock’s net asset value at the time of its sale in January, is higher than the figure of about £50m that was expected when the deal was first announced in November.

Meanwhile, UK Asset Resolution (UKAR), the body set up to wind down Northern Rock’s loans, has also agreed to sell £465m of mortgage assets to Virgin Money.

Keith Morgan, head of wholly-owned investments at UKFI, said: “These transactions are consistent with UKFI’s objective to manage the government investments commercially and to create and protect value for the taxpayer as shareholder.”

The deals bring the total cash proceeds from the sale of Northern Rock to £820m. That is in addition to £150m of bonds and a further cash payment of between £50m and £80m if the business is floated or sold on in the next five years.

UKAR said around 3,700 customers’ mortgages will transfer as part of the deal, but they will see no changes to their terms and conditions.

Virgin Money chief executive Jayne-Anne Gadhia said: “This is an excellent acquisition. It is sensible deployment of some of our excess liquidity to grow our mortgage book with high quality mortgages.