Bradford & Bingley Offloads £4 billion of Loan Assets

by Stewart Douglas

Story link: Bradford & Bingley Offloads £4 billion of Loan Assets

Lending house Bradford & Bingley has today offloaded in excess of £4 billion worth of book debts in a move that has seen share prices rise to reflect the positive liquidity flow and lessening risk derived from the transaction.

The lender today announced that it has sold off around £2 billion worth of loans from within its commercial mortgage business and a further £2.2 billion from within its housing association linked debts.  The move has come amidst rumours that the lender was suffering from liquidity problems and an inability to raise finance after the fall of the securitisation model used by many lenders.

Additionally its interbank lending financing strategy has become less viable in light of the ongoing credit crunch, which has made banks less willing to loan money for affordable rates to their competition in reflection of perceived increases in risk in light of the sub-prime collapse.

Bradford & Bingley have been one of a number of UK banks feared to have run aground in relation to their sub-prime exposure, with rumours rife that the bank was desperately seeking emergency funding in order to sustain its lending operation.

However Bradford & Bingley was quick to suggest today that the move to offload some of its loan portfolio was in no means an indication of desperate financial need, and the company was sufficiently capitalised and liquid so as not to pose any threat of default.

Its loan values today were sold jointly to GE Real Estate, a US based investment company with a particular interest in commercial property-linked security investments.  Latterally Belgian firm Dexia purchased roughly half of the total value of loan assets sold over the course of the day.