Buy-To-Let Bidders Demand Brexit Clause
04-20-2016
Bidders for the owner of the Precise Mortgages brand are seeking a "Brexit clause" ahead of the referendum, Sky News learns.
Bidders for a popular provider of buy-to-let mortgages want to insert a "Brexit clause" in a takeover contract, underlining concerns about the implications of June's referendum for Britain's housing market.
Sky News has learnt that several parties which have lodged an interest in acquiring Charter Court Financial Services - which trades under the Exact and Precise Mortgages brands - have raised the possibility of including a material adverse change (MAC) clause which would be triggered if the UK votes to leave the European Union (EU).
The bidders, which largely comprise private equity firms, have been asked to submit final bids by the end of this week, with offers expected to value the company in the region of £300m.
BC Partners, General Atlantic Partners, a consortium comprising Warburg Pincus and Centerbridge, and Varde Partners are all said to have been considering offers for Charter Court.
Some of the suitors are understood to be concerned that a vote to leave the EU would have serious ramifications for the UK housing market, echoing a warning this week from Moody's, the credit ratings agency, that Brexit "would have a cascading effect by lowering housing demand, which in turn would drive down the cost of rent and increase vacant periods".
A Brexit-related MAC clause would only be required if a deal is struck to acquire Charter Court prior to the UK's referendum on June 23, while many owners of businesses are delaying auctions until after the poll.
The sensitivity of the housing market to the outcome of June's poll underlines the anxiety being felt in many parts of the property industry.
Many transactions are being delayed until after the vote to give buyers and sellers greater certainty.
Charter Court's owners are already contending with the possible impact of a mortgage lending clampdown proposed by the Bank of England given the challenger bank's revenue bias towards buy-to-let loans.
George Osborne, the Chancellor, and Mark Carney, the Bank of England Governor, have expressed concern in recent months - rejected by many bankers - that the buy-to-let market is in danger of overheating.
In the latest proposals, the PRA said that more stringent checks on borrowers' ability to repay loans at higher interest rates aimed "to prevent a marked loosening in buy-to-let underwriting standards and to curtail inappropriate lending and the potential for excessive credit losses".
However, sources familiar with Charter Court previously told Sky News that the new rules could benefit the business because the departure of other participants in the buy-to-let market could provide an opportunity for it to grow its market share.
"This is a high-quality business with very high underwriting standards," the source said.
The auction of Charter Court is being handled by Deloitte, and has been running for several months.
Elliott Associates, a hedge fund, owns a controlling stake in Wolverhampton-based Charter Court.
Charter Court also owns Charter Savings Bank, which began taking deposits last year and had opened more than 30,000 savings accounts when the company last updated on trading in November.
None of the bidders for Charter Court could be reached for comment.