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.