Lanark, Obvion, Optimum marketing trio of European RMBS
Three offerings of European mortgage bonds hit the market this week, two backed by prime first-mortgages originated in the U.K. and the Netherlands and one backed by second-lien U.K. loans.
Lanark Master Issuer PLC 2017-1 is a securitization of mortgage loans to prime borrowers in the UK, with a principal balance of £5.6 billion (€6.35 billion, US$7.09 billion). The capital consists of a cross-currency tranche of Class 1A notes and a Euro-denominated tranche of Class 2A notes; both tranches rated Aaa by Moody’s Investors Service. The sizes of the two tranches has yet to be determine, but both wil; benefit from 12% credit enhancement.
The notes will be secured by 48,479 mortgages on owner-occupied properties originated by Clydesdale Bank (rated Baa2 by Moody’s) and Yorkshire Bank Homes – both trade names for Clydesdale Bank PLC. More than 71% of loans are fixed-rate; the remainder divided between standard variable rate (17.21%) and 11.46% with “tracker” rates pegged to the Bank of England base rate. The weighted average rate is 2.92%, which is lower than the weighted average fo recent Lanark RMBS transactions (including one each in 2016 and 2015).
Over 19% of the loans carry an unusual offset feature benefiting account holders of Clydesdale. Borrowers can reduce interest owed on a mortgage according to the level of savings deposits they have with the U.K. institution. More than 60% of the obligors have an account with Clydesdale, which places the exposure to deposit-based discounts at 4.3% of the pool balance.
Nearly all of the loans were in good standing as of the March 2017 cut-off date (0.77% are in arrears) for more than three months. The 2017-1 pool has weighted average loan-to-value ratio of 65.18% - comparable to the levels of other UK RMBS master trusts, according to Moody’s.
STORM 2017-II B.V. is the latest transaction from Obvion, a Dutch mortgage lender owned by Rabobank.
The largest portion of the STORM 2017-II B.V. transaction is the triple-A rated Class A notes that will comprise 93.02% of the final pool balance with a coupon of 60 basis points over the three-month Euribor benchmark rate. The credit enhancement of 8% is in line with several recent transactions from Obvion, which has frequented the asset-backed market with 42 prior transactions.
r, selling bonds backed by a pool balance of €1.2 billion, according to Moody’s.
The 6,627 borrowers in the pool have primarily fixed-rate loans (92.9% of the pool) that have an average age of 7.13 years, which is more seasoning that recent STORM transaction.
Over 27% of the loans include backing from the country’s “Nationale Hypotheek Garantie” (NHG) program, a government-backed fund which provides financial backing to qualified borrowers to maintain mortgage payments under certain hardship conditions.
Obvion remains the servicer of the loans following the securitization.
Castell 2017-1 PLC is a £242.3 million (£274.8 million, US$307.8 million) non-conforming RMBS transaction backed by second-charge (or second-lien) mortgages originated by specialty lender Optimum Credit Ltd.
Optimum, which is owned by Western European private equity real estate fund Patron Capital Partners, provides financing primarily for debt consolidation and has been operating in the U.K. since 2013.
The senior, Class A notes are provisionally rated triple-A by Moody’s and DBRS.
The proceeds will refinance an existing warehouse facility for Optimum.
The loans carry higher-than-average interest rates around 6.4%, and although they involve only second-lien mortgages, the underlying properties have an average current loan-to-value ratio of 64.1%. That is below that for the average U.K. RMBS transaction, noted Moody’s. The pool also has very few delinquencies, with just 0.73% of the loans in arrears as of the cut-off date. However, a relatively large share of the borrowers are self-employed.