UK Mortgages Limited, which listed on the LSE on 7 July 2015 raising £250m, has announced that it has signed an agreement for its first transaction. The transaction is with the Coventry Building Society Group.
Under the terms of the transaction, UK Mortgages will invest in profit participating notes (PPNs) issued by a dedicated acquisition company which will purchase a high pool of £310m UK buy-to-let non-member mortgages from The Coventry Building Society Group. The pool comprises 1,743 recently originated mortgages with an average balance of £178,855, and an average loan to value of 65%. The Coventry Building Society Group was the originator of the mortgages and following the transaction they will continue to service the mortgage holders as their own clients. , resulting in a seamless transaction for the borrowers.
To supplement UK Mortgages funding for this transaction, and for ongoing financing purposes, the dedicated acquisition company has established a loan financing facility with Bank of America Merrill Lynch which is available for up to 2 years, thereby providing maximum flexibility on the timing of the securitisation.
The transaction’s capital allocation will be rebalanced as further transactions are completed or when the pool is securitised. However, the company expects that the long-run capital usage from this first deal will be around £51m upon securitisation, so representing the deployment of approximately 20% of UK Mortgages initial capital raise. The company says that the estimated annualised return of this first portfolio over its life is 7.35% gross* (assuming securitisation takes place as intended).
UK Mortgages signs agreement for first transaction with The Coventry Building Society : UKML