Bradford & Bingley may opt to inject more cash into its Aire Valley securitization vehicle to avoid breaching its obligations, according to market reports.
The bank has £11.1 billion ($21.5 billion) of mortgages in its Aire Valley master trust program that has its triple-A rating under threat following the recent downgrade of the U.K. mortgage lender.
All three rating agencies downgraded the lender following the failure of its rights issue that that sent B&B's share price spiraling down to £0.67 on June 2, representing a monthly fall of around 60%. B&Bs trading statements showed underlying profits for the first four months of the year falling to £56 million compared with £108 million in 2007.
The recent downgrade could threaten certain replenishing/management provisions of the RMBS master trust.
Standard & Poor's said that some of the options that B&B might implement to address the effect of the recent downgrade include transferring its obligations to a suitably rated counterparty, obtaining a guarantee for its obligations, posting collateral, or taking other steps to ensure ratings are not affected.
B&B has to take action within the next 30 days.