Asset Sale Disclosure: Kaupthing Singer and Friedlander

I am informing the House of the sale of the remainder of a claim against Kaupthing Singer and Friedlander Limited (in administration) (“KSF”) acquired by the Government during the 2007-08 financial crisis. The Government’s claim was held by the financial services compensation scheme (“FSCS”) which compensated KSF depositors at the time of the financial crisis. This sale to Tavira Securities Limited generates proceeds of £17.8 million for the Exchequer.

The Government acquired their claim in KSF to preserve financial stability. The administration of KSF has now been running for over nine years and there is comparatively little value remaining in the residual assets. The Exchequer has received £421 million of dividends prior to this sale. In addition, FSCS has repaid to the Exchequer £2.6 billion (plus interest of £146 million) which it borrowed at the time of the financial crisis to enable it to pay compensation for covered deposits in KSF.

Continuing to hold the claim until the administration of KSF concluded was considered, but this option was discounted as the analysis suggested a sale could achieve value for money and would free up FSCS and HM Treasury capacity previously used to manage the claim to pursue other work.

FSCS discussed the sale with a number of potential counterparties, having previously examined the market for selling claims. The counterparty selected offered the highest price.

The proceeds from this sale will reduce public sector net debt. This marks the conclusion of the Government’s and FSCS’s involvement in KSF.

The Government and FSCS concluded that this sale achieves value for money for the taxpayer having (i) conducted an analysis of whether market conditions were conducive for the sale of this asset; and (ii) conducted an assessment of the fair market value for the asset. The sale made use of a third party broker experienced in selling claims against insolvent companies, which was done to create competitive tension among potential ultimate buyers of the asset.

I can confirm that the sale proceeds of £17.8 million are within the hold valuation range. In 2019-20 the sale reduces public sector net debt (PSND) by £17.8 million and public sector net liabilities (PSNL) and public sector net financial liabilities (PSNFL) by £2.3 million.

The impacts on the fiscal aggregates, in line with fiscal forecasting convention, are not discounted to present value. The net impacts of the sale on a selection of fiscal metrics are summarised as follows:

I will update the House of any further changes to the FSCS as necessary.

[HCWS1827]