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&B’s 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.

Subscribe Now

Access to a full range of industry content, analysis and expert commentary.

30-Day Free Trial

No credit card required. Access coverage of the securitization marketplace, including breaking news updated throughout the day.