UK Mortgages Ltd: Highly Successful Securitisation Completed for
Keystone Portfolio
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18 January 2021
UK MORTGAGES LIMITED
(a closed-ended investment company incorporated in Guernsey with
registration number 60440)
LEI 549300388LT7VTHCIT59
Investment update
UK Mortgages Ltd: Highly Successful Securitisation Completed for
Keystone Portfolio
18 January 2021
The Board of UK Mortgages Limited (“UKML”) and TwentyFour Asset
Management LLP (“TwentyFour”) are pleased to announce that the
launch and pricing of Hops Hill No.1 PLC, the debut securitisation
of a portfolio of first ranking, Buy-to-Let mortgage loans
originated by Keystone Property Finance (“Keystone”), was completed
on Friday afternoon following two and a half days of roadshow
meetings and a further two days of book building.
The transaction, the first UK RMBS deal to be launched in 2021,
was a major success. Practically, the deal has been ready for
launch since early November last year, but as the year-end
approached and the resolution of a number of broader uncertainties
became apparent, such as the approval and roll-out of vaccines, it
became strategically beneficial to hold off until the new year.
This also allowed the portfolio to grow further as ongoing
origination flowed into the pool of loans, thus also allowing for a
larger transaction. Rather than the £350m originally envisaged last
year, we were able to come to market with a transaction totalling
£400m. This includes £63m of pre-funding loans – essentially
allowing the deal to incorporate loans currently in the pipeline
but not yet completed – the first deal to contain this feature
since the start of the pandemic.
The deal saw strong demand from a broad range of investors, and
notably many more than have typically been seen in recent
transactions, with the book building to over 3.4x oversubscription
for the senior notes and more than twice that for the mezzanine
classes. This allowed pricing to be tightened by an impressive 15bp
from initial guidance on the senior notes, which were priced at a
spread of Sonia+95bp, while the mezzanine notes were also tightened
by 25bp or more during the process.
Much of this demand was driven by the exceptional quality of the
loan portfolio that Keystone has originated – loans not previously
seen as an entire transaction by securitisation investors – as
highlighted by the exceptional performance of the pool during the
payment holiday period last year.
Moreover the overall improvement of nearly 20bp achieved by the
transaction compared to the level anticipated when the board and
manager met with investors last year, will significantly improve
the expected returns for the fund, once the pre-funding is
completed at the first Interest Payment Date in May. Further
details on these returns and the securitisation will be presented
to investors in early February.
Chris Waldron, UKML's chairman
said: "This is an excellent deal for UKML and will make an
important contribution to meeting the revised goals we set during
our strategic review late last year."
Rob Ford, portfolio manager at
TwentyFour, said: "We are delighted with the outcome of this
transaction, which saw unprecedented investor demand highlighting
the high quality of the loan pool and securitisation structure.
Additionally, the outstanding pricing performance combined with the
larger deal size will further increase returns for UKML
shareholders. We will now move on immediately to the task of
finalising the follow-on warehouse to enable the company to build
the next portfolio that will ultimately form Hops Hill No. 2."
Further information:
TwentyFour Asset Management LLP
Rob Ford
020 7015 8900
Numis Securities Limited, Corporate Broker
Nathan Brown
Hugh Jonathan
020 7260 1000