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Taxpayer 'Bad Bank' Eyes £800m Loans Sale

(c) Sky News 2012

The "bad bank" created from the remnants of Northern Rock and Bradford & Bingley (Xetra: 602362 - news) (B&B) is preparing to sell a chunk of consumer loans worth hundreds of millions of pounds as it tries to accelerate returns to the British taxpayer.

I have learned that UK Asset Resolution (UKAR) is drawing up plans to offload around £800m of distressed loans through a sale process that could be launched in the new year.

UKAR’s £2.5bn unsecured loan portfolio is largely managed by an entity called Ventura, an outsourcing supplier owned by Capita, the support services group.

The proposal for the loans sale is at an early stage, and advisers have yet to be appointed to work on it, people close to UKAR say.

Assuming a sale does proceed, it would be the second such disposal made by UKAR, following the purchase by Virgin Money of a £465m mortgage book from the taxpayer-owned vehicle in July this year.

Any proceeds would be used to pay off part of the Government’s outstanding loan to UKAR, which currently stands at around £44bn.

The portfolio being earmarked for sale consists primarily of consumer loans and other impaired credit assets.

The vast majority of UKAR’s balance sheet is accounted for by mortgage assets of varying quality, and running off the outstanding book is likely to take many years.

UKAR was established two years ago to combine the businesses of B&B and Northern Rock Asset Management, and has its own board of directors, led by Richard Pym, the former boss of Alliance & Leicester. UKAR has repaid about £6bn of its original loan since it was set up.

They in turn report to the management of UKFI, which was set up to oversee the taxpayer’s stakes in bailed-out banks including Lloyds Banking Group (LSE: LLOY.L - news) and Royal Bank of Scotland (LSE: RBS.L - news) .

UKFI is understood to believe that there is value contained in the debt management expertise accumulated within UKAR, meaning that the vehicle could potentially be used to work more broadly with other companies in the private sector. That would produce an unexpected benefit from the creation of an agency that was only necessary because of the desperate state of Britain's banking system in 2008.

A UKAR spokesman declined to comment.