Wall Street Giants Forge £13bn Mortgages Bid

The Wall Street firm which advised ministers on the nationalisation of Northern Rock seven years ago is forging a bid for a £13bn mortgage book being sold from the wreckage of the collapsed bank.

Sky News has learnt that Goldman Sachs (NYSE: GS-PB - news) 's securities division has joined forces with the tactical opportunities team at investment giant Blackstone (NYSE: BX - news) and Och-Ziff, the powerful hedge fund, to submit an offer to buy a mortgage securitisation vehicle called Granite.

The special situations arm of TPG (Taiwan OTC: 6521.TWO - news) , the buyout firm which tried to buy Bradford & Bingley in 2008, is also part of the consortium.

News (Other OTC: NWSAL - news) of the joint bid comes just hours before George Osborne, the Chancellor, sets out further details of his plans to return the taxpayer's stake in Royal Bank of Scotland (LSE: RBS.L - news) to the private sector.

As Sky News revealed at the weekend, the Chancellor is expected to announce in his annual Mansion House speech the appointment of a City grandee or investment bank to oversee a swift review of options for the 80% shareholding.

That will pave the way for the first tranches of shares to be sold at a loss, as Mr Osborne attempts to demonstrate that taxpayers could yet make a profit from the overall investments made in the banking industry between 2007 and 2009.

The consortium involving Goldman, which advised Alistair Darling's Treasury on the Northern Rock crisis, will be competing against a rival offer from RBS, and others.

If RBS were to succeed with its bid, it would be the first significant acquisition made by the lender since it was bailed out with £45.5bn of taxpayers' money more than six years ago.

The Granite sale process was announced by the Chancellor in his pre-General Election Budget in March, and offers were lodged with UKAR's advisers last week.

Granite is part of UK Asset Resolution (UKAR), which is a subsidiary of UK Financial Investments, the holding company which also manages the Government's shareholding in RBS.

RBS has been examining an offer for Granite in an attempt to deploy some of the surplus liquidity on its balance sheet.

A bid would reflect the bank's stated aims of investing primarily in its UK retail and commercial business, to grow its position in mortgages and to utilise surplus funding.

RBS had a loan-to-deposit ratio of 95% at the end of the first quarter of 2015 and £157bn of liquidity, some of which could be deployed on assets such as those held by Granite.

Under the terms of its rescue by the Treasury in 2008 and amended by the European Commission last year, RBS is restricted from making acquisitions where they involve a price above a certain threshold until it completes the sale of hundreds of branches being rebranded as Williams & Glyn.

That disposal is unlikely to be finalised until 2017, although sources close to RBS said that any attempt to buy parts of Granite would comply with the EU state aid agreement.

In a letter to Mr Osborne in March, UKFI's executive chairman, James Leigh-Pemberton, said that market conditions meant that a sale of the mortgage portfolio could yield an attractive price for the taxpayer.

Previous disposals of assets held by UKAR, including a deal with JP Morgan last year, generated a profit for the Exchequer.

Mr Leigh-Pemberton is expected to write to the Chancellor again this week to say that the time is right to assess options for the taxpayer's stake in RBS.

Goldman Sachs and Blackstone declined to comment.