The Department of Health has announced it will fund any income shortfalls of its newly created NHS property company, in a move widely interpreted as aiming to assure private sector investors about their assets.

In a letter sent last week on behalf of health secretary Jeremy Hunt, DH commercial director Peter Coates also indicated there would be no wholesale sell off of NHS Property Services Ltd.

The company, which is wholly owned by the health secretary, has taken on ownership of a £5bn portfolio of properties and leases owned mainly by organisations which were abolished under the commissioning reorganisation.

Private sector firms which own or have stakes in property which is now leased to NHS Property Services are understood to have raised concerns over the strength of the government’s “covenant” on them.

This is because when they were held by primary care trusts or other public authorities, the leases were backed by the Treasury.

No such guarantee exists for the new company, causing potential concern for investors whose value depends on protected income from the leases.

Investors raised concerns about the effect of the changes on the covenant of local improvement finance trust assets earlier this year.

Last week’s letter acknowledges that the new company does not enjoy the same strength of covenant as PCTs.

It says: “However, it would be wrong to think that this signifies any reduction in the commitment of the secretary of state for health to the assets and liabilities that NHS Property Services will inherit.”

The health secretary entered into an “irrevocable indemnity” in relation to the company, under which the government could pay “all valid payment obligations” arising from its assets.

“My intention… is to ensure that NHS Property Services is always in a position to meet its obligations in respect of the assets transferred to it,” the letter says.

The commitment covers 2013-14 and 2014-15.

The letter also says it would be “untenable” to wind up the company without transferring its assets to another entity “of equal covenant strength”. NHS property sector sources said they interpreted this as meaning there would be no sell-off of the entire property company or its portfolio to the private sector, but that it did not rule out piecemeal sales of assets.

The move follows talks between the Department of Health and the Primary Care Premises Forum, which represents investors.

Last week’s letter was welcomed by Aviva, which has hundreds of millions of pounds invested in NHS properties through the private finance initiative, LIFT and third party developments schemes. A spokeswoman said the company was “comfortable with the proposed solution”.

David Lawrence, executive director for health at property firm Capita Symonds, said: “It is understandable that given the scale of the changes brought about by the abolition of the PCTs that investors will be nervous regarding the status of the new company.” Last week’s move was a “sensible step to take”, he added.