Results Announcement

NRAM (No. 1) Limited

 

28 June 2016

RESULTS ANNOUNCEMENT

 

NRAM (No. 1) Limited ('NRAM (No. 1)' or 'the Company') today issues its results for the period from incorporation on 24 June 2015 to 31 March 2016.  NRAM (No. 1) is a wholly owned subsidiary undertaking of UK Asset Resolution Limited ('UKAR'). UKAR is wholly owned by the Treasury Solicitor as nominee for HM Treasury.  UKAR was established to manage the wind down of the mortgage books of Bradford & Bingley plc ('B&B') and NRAM plc. NRAM (No. 1)'s full Annual Report & Financial Statements are available to view today on the NRAM (No. 1) website in the corporate section.  The Annual Report & Financial Statements have also been submitted to the National Storage Mechanism and will shortly be available for inspection at www.hemscott.com/nsm.do. NRAM (No. 1) is registered in England and Wales under company number 09655526.

 

The condensed financial information presented in this announcement is extracted from NRAM (No. 1)'s full Annual Report & Financial Statements for the period from incorporation on 24 June 2015 to 31 March 2016, which have been prepared in accordance with EU-adopted International Financial Reporting Standards.

 

Overview

During 2015, UKAR managed a sale process with the objective of disposing of a significant proportion of NRAM plc's loan portfolio. The sale was structured in such a way that, in addition to the loan portfolio, the successful bidder purchased the NRAM plc legal entity. The Company was incorporated to facilitate the transaction and will be responsible for managing the assets and liabilities of NRAM plc that were not included in the sale.

 

The Company was incorporated on 24 June 2015 and, other than entering into an Option Agreement with NRAM plc and affiliates of Cerberus Capital Management LP ('Cerberus') on 13 November 2015, did not trade during the period. As described in note 12 of the Financial Statements, after the end of the period, following satisfaction of a number of conditions precedent including receipt of regulatory approval for the Company from the Financial Conduct Authority, a series of steps to complete the transaction took place as follows:

 

·      29 April 2016 - the Company acquired NRAM plc from UKAR in a share for share exchange.

·      30 April 2016 - NRAM plc declared a dividend in specie of £3,787.4m and transferred an equivalent amount of mortgage loans to the Company.

·      30 April 2016 - the residual assets and liabilities not being sold to Cerberus were transferred to the Company by NRAM plc.

·      5 May 2016 - the Company sold 100% of the shares in NRAM plc to Cerberus and assumed responsibility for certain warranties and indemnities provided to Cerberus as part of the wider transaction (see note 10 of the Financial Statements). On completion of these movements the Company had assets of £12.6bn including £9.9bn of loans to customers and shareholder's funds of £4.5bn. The principal liability of the Company is a loan from HM Treasury of £7.3bn.

 

The Company did not trade during the period. On 30 April 2016 the Company commenced operations as an owner and servicer of mortgage loans secured on residential properties, and unsecured loans, and of associated services. No further lending is carried out.

 

The overall aim of UKAR is to maximise value for the taxpayer. This will be achieved by focusing on key activities and themes based on each of the following three objectives:

 

·     reduce, protect and optimise the Balance Sheet;

·     to maximise cost-effectiveness and efficiency through continuous improvement; and

·     to be excellent in customer and debt management.

 

These objectives are underpinned by the need to treat all stakeholders fairly.

 

The focus of the Company is now on servicing the mortgage book and on the collection of arrears in an effective and efficient manner.

 

Principal risks and uncertainties

The principal risks and uncertainties of the Company are assessed and managed as part of the risk management strategy of the wider UKAR Group, of which the Company is a wholly owned member. Details of that Group's principal risks and uncertainties are included in its Annual Report and Accounts for the year ended 31 March 2016.

 

Key performance indicators

The Company did not trade during the period and therefore the Directors do not believe that an analysis using key performance indicators is appropriate.

 

Dividends

No dividend was paid in the period, and the Directors do not recommend the payment of a final dividend for the period.

 

Future outlook

The Directors expect that during 2016/17 the Company will operate as the owner and servicer of loans to customers. At the present time the Directors do not foresee any changes in the Company's activities.

 

Directors and their interests

The Directors who served during the period and up to the date of signing the Financial Statements were as follows:

Richard Pym (appointed 21 March 2016)

Richard Banks (appointed 24 June 2015, resigned 5 June 2016)

Ian Hares (appointed 24 June 2015)

Kent Atkinson (appointed 21 March 2016, resigned 5 June 2016)

Michael Buckley (appointed 21 March 2016)

Susan Langley (appointed 21 March 2016)

David Lunn (appointed 21 March 2016)

Brendan McDonagh (appointed 6 June 2016)

Keith Morgan (appointed 21 March 2016)

John Tattersall (appointed 21 March 2016)

 

The Directors did not hold any interest in the ordinary shares of the Company during the period.

 

All of the Directors are also Directors of the Company's parent undertaking UKAR.

 

Risk management and control

The Directors have responsibility for the overall system of internal control and for reviewing its effectiveness. The effectiveness of the risk management is then monitored on an ongoing basis. Details of the Company's risks and their management and control are provided in note 8 of the Financial Statements and further discussion in the context of the UKAR Group as a whole is provided in that Group's 2016 Annual Report & Accounts which do not form part of this Report and Financial Statements.

 

The Directors are of the opinion that the Company had no material exposure to financial risks at 31 March 2016.

 

Directors' indemnities

Qualifying third party indemnity provision for the benefit of all Directors was in force from the date or their appointment during the period under review, and remains in force at the date of approval of the Directors' Report and Financial Statements.

 

UKAR has also arranged Directors' and Officers' Insurance on behalf of the Directors in accordance with the provisions of the Companies Act 2006.

 

Statement of Directors' responsibilities

The Directors are responsible for preparing the Strategic Report, Directors' Report and the Financial Statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare Financial Statements for each financial period. Under that law the Directors have prepared the Financial Statements in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union. Under company law the Directors must not approve the Financial Statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing these Financial Statements, the Directors are required to:

 

·      Select suitable accounting policies and then apply them consistently;

·      Make judgements and accounting estimates that are reasonable and prudent;

·      State whether applicable IFRS as adopted by the European Union have been followed, subject to any material departures disclosed and explained in the Financial Statements; and

·      Prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

 

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the Financial Statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

 

Disclosure of information to auditors

As at the date of this report, each person who is a Director confirms that:

 

·      so far as each Director is aware, there is no relevant audit information of which the Company's auditors are unaware; and

·      each Director has taken such steps as he or she ought to have taken as a Director in order to make him or herself aware of any relevant audit information and to establish that the Company's auditors are aware of that information.

 

This confirmation is given and should be interpreted in accordance with the provisions of section 418 of the Companies Act 2006.

 

Balance Sheet as at 31 March 2016

 

			31 March 2016 £
Assets
Cash at bank and in hand			0.25
Total assets			0.25
Equity
Share capital			0.25
Total equity			0.25

 

Statement of Changes in Equity for the period from 24 June 2015 to 31 March 2016

 

 

	Ordinary shares £	Retained earnings £	Total Equity £
Balance at incorporation and 31 March 2016	0.25	-	0.25

 

Contingent liabilities

As detailed in note 12(a) of the Financial Statements, on 5 May 2016 the Company completed the sale of its 100% shareholding in NRAM plc to Landmark Bidco Limited, an affiliate of Cerberus. At this point the sale of NRAM plc included the legal title to the loans sold by NRAM plc to Cerberus European Residential Holdings BV on 7 December 2015 (the 'Completion 1 loans') as well as a further £483m of loans (the 'Completion 2 loans'). From the date of the Option Agreement on 13 November 2015, the Company provided certain warranties and indemnities to Cerberus in respect of the sale of the shares and Completion 2 Loans, and from 5 May 2016 also became liable for the warranties and indemnities which had been provided by NRAM plc to Cerberus in respect of the Completion 1 Loans. The Option Agreement sets various time limits for bringing claims under the warranties: for most of the warranties this time limit is 5 May 2018 or 5 May 2019, while for certain tax-related warranties the time limit is 5 May 2023.

 

Events after the reporting period

(a) As stated in the Strategic Report, on 13 November 2015 UKAR announced that NRAM plc had agreed to sell a £13bn asset portfolio to affiliates of Cerberus, which included £12bn of mortgages from the Granite securitisation structure plus a further £1bn of non-Granite assets. The sale of the Granite loans was recognised by NRAM plc in December 2015 when the beneficial interest of those loans transferred to Cerberus. As detailed in note 10 of the Financial Statements the Company provided certain warranties and indemnities to Cerberus.

 

The second stage of this transaction completed in April and May 2016 as follows:

29 April - the Company acquired NRAM plc from UKAR in a share-for-share exchange. At this point HM Treasury committed to providing financing facilities and guarantee arrangements to the Company and confirmed its intentions to continue to provide funding until at least 1 January 2018.

 

30 April - NRAM plc declared a dividend of £3,787.4m to the Company and paid the dividend in specie, using mortgage loans.

 

30 April - NRAM plc transferred certain assets and liabilities to the Company. These assets and liabilities were those that were not to be included in the sale to Cerberus and included all of NRAM plc's investments in subsidiary undertakings, £9,947m of loans to customers, NRAM plc's 30 April balances in respect of certain bank accounts, investment securities, retirement benefit assets, HM Treasury loans, the EMTN debt securities in issue and derivative financial assets and liabilities. These balances were transferred at their carrying amounts and a net balance owed by the Company to NRAM plc was left outstanding.

 

5 May - the Company sold 100% of the shares of NRAM plc to Cerberus, generating a small accounting profit.

 

(b) In 2013 NRAM plc submitted an insurance claim in respect of remediation payments made by NRAM plc in respect of certain former mortgage customers.  A settlement offer of c£50m has been received by NRAM plc.  Under the terms of the sale of the shares in NRAM plc to Cerberus on 5 May 2016, described in note 12(a), any proceeds of this claim are payable by NRAM plc to the Company.  The Directors anticipate that the proceeds of c£50m will be received by the Company in due course.

 

 

Ends

 

 

Media Contact:

 

Brunswick

Jonathan Glass / Nick Cosgrove

Tel:  +44 20 7404 5959

Email: ukar@brunswickgroup.com