Buy-To-Let Sale Collapses Amid Brexit Fear

A £400m auction of one of the UK's fastest-growing buy-to-let mortgage lenders has collapsed amid investor concerns about the impact of a possible 'Brexit' on Britain's housing market.

Sky News has learnt that bidders for Charter Court Financial Services - which owns the Exact and Precise Mortgage brands - were informed in recent days that a sale process has been abandoned.

The decision came just weeks after private equity firms which had been pursuing Charter Court raised the prospect of inserting a clause related to next month's European Union (EU) referendum in a deal to acquire the company.

BC Partners, Varde Partners and Warburg Pincus were among the buyout firms which had tabled offers for the buy-to-let mortgage lender, but these are understood to have fallen substantially short of the £400m price-tag set by Elliott Associates, the hedge fund which owns a controlling stake.

Charter Court made a profit after tax of £21.4m in 2015, a figure that is expected to nearly double this year.

Based on the valuations of publicly traded peers such as Aldermore and One Savings Bank, those earnings imply that Charter Court would be worth in the region of £400m.

Sources said that Elliott, which was using Deloitte to handle the auction, was now likely to retain ownership of Charter Court before considering a stock market listing in two-to-three years' time.

The disclosure that June's referendum has depressed the confidence of investors in a domestic British business underlines the fact that many financial investors are deferring decisions about buying and selling companies in the period before the vote.

Johannes Huth, a partner at the buyout firm KKR, which used to own Boots, told The Wall Street Journal on Wednesday: "Nobody's doing a deal right now until it's clear what happens."

KKR was not among the bidder for Charter Court, whose suitors were concerned that a vote to leave the EU would have serious ramifications for the UK housing market.

Last month, Moody's, the credit ratings agency, warned that Brexit "would have a cascading effect by lowering housing demand, which in turn would drive down the cost of rent and increase vacant periods".

A Brexit-related material adverse change (MAC) clause would only have been required if a deal was struck to acquire Charter Court prior to the referendum on June 23.

Many owners of businesses are instead delaying auctions until after the poll.

Charter Court's owners are already contending with the possible impact of a mortgage lending clampdown proposed by the Bank of England given the challenger bank's revenue bias towards buy-to-let loans.

George Osborne, the Chancellor, and Mark Carney, the Bank of England Governor, have expressed concern in recent months - rejected by many bankers - that the buy-to-let market is in danger of overheating.

A Charter Court spokesman declined to comment on Wednesday.