Treasury makes Northern Rock transfer order

8 December 2009 | By Natalie Thomas

The transfer order provides the legal mechanism through which the restructure will be implemented, which will effect the legal and capital restructuring of the company on 1 January.

As previously announced, the restructuring will result in two separate companies, Northern Rock (Asset Management) plc - the existing company which will hold and service the majority of the existing residential mortgage book, approximately £50bn and will be regulated by the FSA as a mortgage provider.  

Upon completion of the restructuring, Northern Rock (Asset Management) plc will surrender certain of its authorisations, including its authorisation to accept deposits.  At the Transfer Date, it is expected that over 90% of the mortgages held by Northern Rock plc will be fully performing and not in arrears.  

The portfolio will include the company’s residual interest in those mortgages which have been sold to the Granite securitisation programme and the Northern Rock covered bond programme totalling approximately £38bn.  

This company will not offer any new mortgage lending.  
 

Northern Rock (Asset Management) plc will also continue to hold all unsecured loan accounts and will be the borrower in respect of the government loan and the Company’s outstanding wholesale funding and subordinated debt as at the transfer date.  

As part of the restructure, the government loan will increase by approximately £8bn to provide cash to be transferred to the new bank to support its retail deposit book and new lending activity.

As previously announced, the European Commission confirmed on 28 October 2009 that it had approved the restructuring plan for Northern Rock.  The Company continues to work closely with the FSA to gain the necessary regulatory approvals for the two companies.

If you enjoyed this article, sign up here to receive daily email updates from Mortgage Strategy and Follow @mortgagestrat