UK MORTGAGES LIMITED - Investment Update

PR Newswire
London, April 14

14 April 2016

UK MORTGAGES LIMITED

(a closed-ended investment company incorporated in Guernsey with registration number 60440) (a non-cellular company limited by shares incorporated in the Island of Guernsey under the Companies (Guernsey) Law 2008, as amended, with registered number 60440 and registered as a Registered Closed-ended Collective Investment Scheme with the Guernsey Financial Services Commission)

Investment Update

The Board of UK Mortgages Limited (the "Company") and TwentyFour Asset Management LLP (TwentyFour) are pleased to present an update on progress with further investments.

The portfolio management team remain fully engaged on a number of prospective opportunities with the aim of fully investing the Company's capital in as timely a manner as possible.As stated previously, transactions are generally subject to non-disclosure agreements, as full disclosure before final closing would lead to a loss of competitive advantage. However, we have endeavoured to provide as much detail as possible on deal progression.

1 - The Mortgage Lender (TML)

Since the last update the Company has signed a conditional asset purchase agreement with TML and the expected timeframe forclosing the transaction in April remains on track, with TML to begin originating immediately after closing. TwentyFour continues to progress the ancillary requirements of such a transaction and is negotiating with warehouse funding,hedging and other service providersin order to ensure all elements are in place when the transaction closes. As previously stated, whilst it is difficult to predict accurately, origination volume from TML in the first year is expected to be approximately £250 million. Furthermore, origination beyond that is expected to be higher, as TML and their products become established in the market. The future flow nature of this transaction will be particularly beneficial to the Company as it should provide a natural growth engine, andbecause the yield on this product would be higher than that on the first portfolio of BTL mortgages acquired from Coventry Building Society in November 2015, it is expected to generatean incrementallypositive contribution to the Company's dividend in future years.

2 - Vintage pools

In our previous update, we referred to a vintage pool transaction which was in the early stages of discussion.This transaction has not proved to be viable, however two further vintage pool transactions are now under discussion. Both of these pools were originated prior to the global financial crisis,are different in nature and from different originators. Neither sale is driven by asset performance, which is strong in both cases. Both pools are more than large enough to enable a public senior securitisation subsequent to initial purchase.

3 - Buy to Let

As per the previous update TwentyFour continues to be in discussions with a mainstream mortgage lender regarding a portfolio of newly originated BTL loans, although timing expectations on this are now likely to fall into Q3 2016.

4 - New Opportunities

TwentyFour is still engaged in discussions withan ongoing originator of a broad range of mortgage products. Whilst these remain at a relatively early stage, we have received the pool data and credit and cashflow analysis is underway in order to establish viability and to enable base-level economic discussions to commence, which should occur in the coming days.

Furthermore TwentyFour is currently at an introductory stage of a potentially promising project with the originator of a BTL portfolio. Non-Disclosure Agreements are expected to be in place in the coming days which would then allow loan analysis to commence, and dialogue to become more detailed.

5 - Transaction Sizes and Use of Capital

All of the opportunities mentioned above are of suitable enough size that should any one, and certainly two, prove viable then when added to the estimated first year's origination volume from TMLandthe already completed BTL transaction, the Company's capital would be broadly fully invested and able to generate a yield comfortably within the target return range.

It should be noted that theseopportunities are complex transactions to negotiate with many moving parts, and whilst they are in the pipeline because the deals fit the Company's risk profile, there is no guarantee that these deals will complete. The detailed work carried out on these transactions and the decision to withdraw from unviable transactions is a reflection of our focus on product suitability for this vehicle and the high quality of our due diligence process.

6 - Term Funding

Whilst it is not possible to comment on market timing, we continue work on the various documentation and structural requirements in order to be able to complete the term funding, via a securitisation, of the BTL pool purchased from Coventry Building Society last year, in order that when market conditions are opportune the securitisation can be launched in a timely manner.

7 - Target Return*

The Company has today declared a first interim dividend of 1.5p per share in respect of the period to 31 March 2016, which is payable on 29 April 2016. This dividend has substantially been funded from the capital reserves, as the Company's net income has been limited at this stage of the deployment programme. The Board remains confident that with the transaction pipeline that TwentyFour is currently working on, as outlined above, the Company is progressing to a position where dividends will be fully funded out of net income and capital may be replenished from returns made in excess of the dividend target.

For further information, please contact:

Numis Securities Limited:
Nathan Brown [phone]
Hugh Jonathan

TwentyFour Income Fund Limited:
John Magrath [phone]
Alistair Wilson

* Estimates of the Company's potential total return are based on certain scenarios and other assumptions. All references herein to potential future returns or distributions are targets or estimates and there can be no guarantee or assurance that they will be achieved.