My honourable friend the Economic Secretary to the Tresaury (Simon Kirby) has today made the following Written Ministerial Statement.
The Aire Valley Master Trust (AVMT) is a Residential Mortgage Backed Securitisation (RMBS) programme, which currently encumbers approximately £8.5 billion of mortgage assets and provides Bradford & Bingley (B&B) with just over £2.6 billion of funding. As at 30 July 2016 the balance of the outstanding AVMT notes was approximately £5.4 billion. B&B holds £2.8 billion of these notes, with the remaining £2.6 billion (the funding) held by market. B&B propose to call the notes to unencumber the mortgages enabling them to be included in any future sales when market conditions allow. The transaction replaces expensive legacy B&B-issued debt with cheaper DMO-issued debt, with no change in balance sheet totals. The transaction is, therefore, neutral from both a Public Sector Net Debt and budgetary perspective.
B&B has a working capital facility loan agreement with HM Treasury, allowing them to borrow up to a maximum of £11.5 billion to cover everyday operations of the company. B&B propose to draw down £2.975 billion from this facility to redeem the notes.
The cash for the loan will form part of HM Treasury’s Supplementary Estimate 2016-17, which will not receive Royal Assent in the associated Supply and Appropriation bill until mid-to-late March 2017. HM Treasury will, therefore, be utilising the Contingencies Fund to make this urgent payment. Whilst B&B’s capital facility draw down will be £2.975 billion to redeem the notes, £0.750 billion will be repaid from income. The additional amount, therefore, that HM Treasury requires – and will form part of their Supplementary Estimate request – is therefore £2.225 billion.
Parliamentary approval for additional cash of £2,225,000,000 for this expenditure will be sought in a Supplementary Estimate for HM Treasury. Pending that approval, urgent expenditure estimated at £2,225,000,000 will be met by repayable cash advances from the Contingencies Fund.
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