UK Mortgages Ltd Investment Update

 
TIDMUKML 
 
17 June 2016 
 
UK MORTGAGES LIMITED 
 
(A closed-ended investment company incorporated in Guernsey with registration 
number 60440) 
 
Investment Update 
 
The Board of UK Mortgages Limited (the "Company") and TwentyFour Asset 
Management LLP ("TwentyFour") are pleased to present an update on the Company 
and progress with further investments. 
 
The TwentyFour 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 - Term Funding 
 
TwentyFour is pleased to report that the Company has completed its inaugural 
securitisation, Malt Hill No 1 PLC. The AAA notes were issued with a highly 
competitive coupon of 3m LIBOR plus 1.35%, an improvement on market 
expectations. The final work on collateral eligibility with the Bank of England 
and the ECB is progressing well and the Company would expect this largely 
administrative process to be completed soon. 
 
The public sale of GBP263.3m AAA-rated bonds was completed, with a leverage of 
6.8x on the IPO proceeds. The process began with a private syndication process 
and followed with a publicly launched deal resulting in five investors taking 
the full amount. It was widely reported on newswires and in industry press, and 
augurs well for future transactions. 
 
2 - The Mortgage Lender (TML) 
 
TwentyFour has made good progress with regards to the ancillary requirements 
for the transaction, with finalisation of documentation expected to be complete 
in the coming weeks. As soon as the agreements are complete, TML is ready to 
commence originating mortgages, having already gained FCA licencing for their 
business. The origination volume from TML is expected to be GBP250m on a pro rata 
basis. 
 
3 - New Opportunities 
 
TwentyFour is working on a number of potential transactions, with the caveat 
that deal negotiations often present unforeseen challenges and are dependent on 
a number of factors, not least the macro environment and internal bank 
processes. Note that this pipeline is the most comprehensive that TwentyFour 
has seen since the launch of the Company. In order of expected delivery: 
 
  * Discussions have commenced on a residual UK BTL mortgage portfolio and 
    necessary documentation has been signed to receive data. 
  * A portfolio of non-conforming mortgages with circa 5% 90+ days arrears. 
  * A UK BTL opportunity originated by a challenger bank. 
  * Introductory discussions have commenced with a regional UK building society 
    regarding their BTL book. 
 
Factored into all progress is the fact the upcoming referendum regarding the 
UK's future in the EU has become an item of considerable market stress that may 
cause some delays in regard to business readiness to take commercial decisions. 
 
Since the last update, in line with expectations that deal flow progress is 
dependent on macro and company specific dynamics, two transactions have been 
put on hold by mortgage originators until Q4 and 2017 respectively. Despite 
this, the pipeline is very strong and the team are working at full capacity on 
delivering further transactions. 
 
4 - Target Return* 
 
Following securitisation of the Coventry portfolio, the expected scenario based 
IRR of the transaction is c8.27% gross of fees. This is in line with the 
Company's original stated expectation of an IRR return between 7-10%. 
 
5 - Resource 
 
A number of changes have been made to TwentyFour's internal resourcing with 
regards to UKML, to enhance investor interaction and communication on the fund. 
To this end, an additional partner of the firm is engaged to act as a bridge 
between investors, transaction team, board and operations. There are now six 
members of the ABS team focussed on delivery of this product for shareholders. 
 
*The estimate of the potential total return for this investment is calculated 
across certain scenarios and subject to certain assumptions, no representation 
is made as to the reasonableness of the assumptions made within or the accuracy 
or completeness of any modelling. 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. The 
information in this document is not intended to predict actual results and no 
assurances are given with respect thereto. 
 
 
 
END
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