JC Flowers to buy £450m of loans from Northern Rock

The financial services specialist firm is expected to pay around £300m for the book of unsecured loans, five years after submitting a failed bid for the whole of the nationalised UK lender.

JC Flowers & Co. is in the final stages of negotiations to buy £450 million (€522 million, $686 million) of loans from Northern Rock, according to reports.
The US firm is expected to pay around £300 million for the portfolio, in a sale to be managed by the UK Asset Resolution, a state-run body created to manage assets formerly held by nationalised lenders North Rock and Bradford & Bingley. 

The lending book, made of unsecured loans, represents less than 1 percent of the overall portfolio held by UKAR. The institution’s primarily manages residential mortgages, which at 31 December 2012 represented £66 billion out of its £68 billion balance sheet, according to UKAR’s latest annual report. Unsecured loans, at £1.9 billion, make up most of the rest. 

JC Flowers could not be reached for comment on the news, which was first reported by the Times

Newcastle-based Northern Rock was nationalised in February 2008 by the British government, a few months after being shut from the money markets and falling under a bank run. It was then split into a ‘good’ bank, Northern Rock plc, and one responsible for winding down its non-performing loans, Northern Rock Asset Management. 

JC Flowers made an initial offer for the whole business in 2007, but negotiations soon came to a halt following the government’s decision to go ahead with the nationalisation. It again lost a bidding battle for part of the bank last year, when Northern Rock was instead sold to Virgin Money. 

The firm, which has a special focus on buyouts in the financial services sector, has been eager to buy assets from European institutions pressed to more demanding capital regulations. It bought Belgian insurer Fidea from local bank KBC last year, as well as loan insurance broker Compagnie Européenne de Prévoyance from PAI Partners in 2011. 

Such deals have proven to be a rarer occurrence than most observers originally expected, however. While the eurozone crisis has depressed valuations of financial services businesses across the continent, observers suggest that this has not led to flurry of transactions as sellers have often been reluctant to let go assets at fire sale prices.