Kensington Marketing Next Non-Conforming UK RMBS

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The Blackstone Group and TPG Special Situations Partners-owned U.K. specialty lender Kensington Group is marketing a £360 million ($554 million) securitization of nonconforming U.K. mortgages.

The deal, called Residential Mortgage Securities 28, pools nonconforming and buy-to-let mortgages originated by Kensington subsidiaries, Kensington Mortgages and Money Partners. Blackstone and TPGSSP aquired the lenders in September 2014.

Owner occupied home loans represent 86% of the pool. Most of the loans were originated by Kensington in 2007 and benefit from a long payment history that averages six years, with a weighted average remaining term of 16 years, according to Standard & Poor’s.  “The pool is more seasoned than we usually see in nonconforming RMBS transactions,” S&P stated in its presale report. “In our view, more seasoned performing loans exhibit lower risk profiles than less seasoned loans.”

The loans have a weighted average loan-to-value ratio of 72.3% and the average loan is sized at £121,540.

The issuer plans to sell notes rated from ‘AAA’ to ‘BBB-‘. The class A senior notes, rated ‘AAA’ benefit from credit enhancement of 27.3%, the class B ‘AA’ rated notes have credit enhancement at 16.5%, the class C , ‘A’ rated notes have credit enhancement at 9.05%, the class D ‘BBB+’ rated notes have credit enhancement at 3.30% and the class E ‘BBB-‘ rated notes have credit enhancement at 3%. All of the notes are due June 2046.

Morgan Stanley, Citigroup Global Markets and Credit Suisse Securities are the joint lead managers.

RMS 28 is the second U.K. non-conforming loan transaction to market this year. Bank of America Merrill Lynch and JP Morgan, earlier this month, began marketing a £208 million bond backed the asset class via Precise Mortgage Funding 2015-1.  The deal pooled nonconforming loans originated by U.K. lender Charter Court Financial Services. On Monday, S&P reported that the issuer was expected to sell the 4-year, triple-A  rated  notes at 90 to 95 basis points over the three month Libor.  

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