UK Mortgages Ltd - Investment Update - Securitisation Announcement
London, April 8
UK Mortgages Ltd: Fourth Securitisation for UKML
THE INFORMATION IN THIS ANNOUNCEMENT IS RESTRICTED AND IS NOT FOR PUBLICATION, RELEASE OR DISTRIBUTION DIRECTLY OR INDIRECTLY IN OR INTO OR FROM THE UNITED STATES, CANADA, AUSTRALIA, THE REPUBLIC OF SOUTH AFRICA, THE REPUBLIC OF IRELAND OR JAPAN.
08 April 2019
UK MORTGAGES LIMITED
(a closed-ended investment company incorporated in Guernsey with registration number 60440)
Fourth Securitisation for UKML
The Board of UK Mortgages Limited ("UKML) and TwentyFour Asset Management LLP ("TwentyFour") are pleased to announce that Barley Hill No.2 PLC has successfully completed the public sale of £209.15mm of senior notes as expected. The securitisation is backed by a pool of owner-occupied mortgages originated by The Mortgage Lender ("TML") completed between October 2016 and today and purchased on a forward flow basis by UK Mortgages Corporate Funding Designated Activity Company ("DAC"), the Acquiring Entity in which UKML has invested as described in its prospectus dated 23rd June 2015. The transaction also contains a "Prefunding" feature which allows for further purchases of future completions by TML up until the securitisation's first Interest Payment Date in August 2019.
Due to the nature of the origination of the pool, which took place on highly consistent basis over more than two years, the loans that were originated with a two-year fixed rate term are expected to pre-pay relatively quickly and therefore the notes were split into two tranches - £202.2mm of Class A notes, rated Aaa/AAA by Moody's and DBRS, and £6.95mm of Class B notes rated Aa1/AA (high) respectively. This allowed the transaction to more efficiently negate the effects of the deleveraging generated by those pre-payments, thereby improving returns for the Company whilst still operating within its leverage targets. Furthermore this deleveraging means that it would be reasonable to expect that the Class B notes should be upgraded to a AAA rating relatively quickly following the end of the prefunding period.
The Class A notes were issued with a coupon of 3m GBP LIBOR plus 1.10%, with a 2.24yr Weighted Average Life ("WAL") to the refinancing date in February 2022, and the Class B noted carry a coupon of 3m GBP LIBOR plus 1.60% with a 2.89yr WAL. This compares favourably with comparable issues. For example, Kensington mortgages, a lender established for over 20 years in the same part of the mortgage market and with considerable history as a securitisation issuer, placed their latest transaction in March with the Class A notes priced just 13bps tighter than the debut issue from Barley Hill and with the Class B notes at the same spread.
The issuer will seek Bank of England eligible status for the Class A notes.
Rob Ford, Partner at TwentyFour said "We are extremely pleased with this inaugural transaction from our Barley Hill securitisation programme of TML-originated loans, and the fourth securitisation from UKML. Whilst the pool has taken longer than envisaged to originate, given the competitive challenges in the mortgage market that TML have faced since they began originating these loans, we have nevertheless built a high quality portfolio of loans which is evidenced by the exceptional performance so far and we now have a sound foundation to more efficiently generate further origination on an ongoing basis to form the collateral for future Barley Hill transactions. Furthermore, the securitisation and its structure more efficiently leverages the portfolio which will be additive to income for the Company."
Silvia Piva, Portfolio Manager at TwentyFour said "Once again we are pleased to be able to bring a successful public securitisation to market, an inaugural owner-occupied deal for both UKML and TML, and backed by a high quality portfolio. This reinforces UKML's status as a regular issuer in the UK RMBS market."
TwentyFour Asset Management LLP
020 7015 8900
Numis Securities Limited, Corporate Broker
020 7260 1000
This announcement has been prepared for information purposes only, it is not a prospectus.
The distribution of this announcement in certain jurisdictions may be restricted by law. Persons into whose possession this announcement comes are required by the UKML, TwentyFour and Numis to inform themselves about, and to observe, such restrictions.
Certain statements in this announcement are forward-looking statements which are based on UKML's expectations, intentions and projections regarding its future performance, anticipated events or trends and other matters that are not historical facts. These statements are not guarantees of future performance and are subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. TwentyFour's estimate of the potential gross IRR for this investment is calculated based on certain scenarios and subject to certain assumptions. This and any other references herein to potential future returns or distributions are targets and not forecasts and there can be no guarantee or assurance that they will be achieved. Given these risks and uncertainties, prospective investors are cautioned not to place undue reliance on forward-looking statements. Forward-looking statements speak only as of the date of such statements and, except as required by applicable law, UKML undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.
The information contained in this announcement is subject to change without notice and neither the UKML, TwentyFour nor Numis assume any responsibility or obligation to update publicly or review any of the forward-looking statements contained herein.
Recipients of this announcement who are considering acquiring New Shares in UKML are reminded that any such acquisition must be made only on the basis of the information contained in the Prospectus and any supplementary prospectus(es) thereto which may be different from the information contained in this announcement. This announcement does not constitute or form part of and may not be construed as an offer to sell, or an invitation to purchase, investments of any description, nor as a recommendation regarding the possible offering or the provision of investment advice by any party. No information in this announcement should be construed as providing financial, investment or other professional advice and each prospective investor should consult its own legal, business, tax and other advisers in evaluating any investment opportunity. In particular, an investment in UKML involves a high degree of risk and prospective investors should read the section in the Prospectus entitled "Risk Factors" for further information.