Lloyds TSB marked the end of the summer holiday with two deals, one that priced ahead of the long bank holiday weekend and a second deal that is slated to begin marketing.
The U.K. bank closed a €250 million ($316 million) credit card private placement. The bank also has a £3.78 billion ($5.84 million) prime buy-to-let RMBS deal dubbed Edgbaston RMBS 2010-1 in the pipeline. Moody's Investors Service is rating the offering.
The transaction represents the first securitization of just U.K. BTL residential mortgage loans originated by Bank of Scotland, which Moody's rated 'Aa3'/'Prime-1', according to a release from the rating agency on the transaction.
The assets backing the notes, which are approximately worth £3,780 million, are prime buy-to-let mortgage loans secured on residential properties from the U.K, Moody's said. The portfolio will be serviced by Bank of Scotland.
According to Moody's, the key drivers for the portfolio expected loss are the performance of the seller's total BTL book, the benchmarking with comparable deals in the U.K. BTL sector and the current economic conditions in the U.K. along with historic recovery information of foreclosures
received from the seller.
Considering the historical performance of the U.K. RMBS market and the originator's book, the rating agency believes the assumed expected loss is appropriate for this offering.
The rating addresses, Moody's said, the expected loss posed to buyers by the notes' legal final maturity. Moody's believes that the structure allows for timely payment of interest and principal with respect to the notes by the legal final maturity. Its ratings only address the deal's credit risk.
Other non-credit risks have not been addressed, Moody's said, but might have a considerable impact on the yield to investors.
Credit Card Deal
The credit card offering was its Series 2010-A3 notes of Penarth Master Issuer that were all denominated in euros, but backed by credit card receivables arising under designated MasterCard and Visa revolving credit card accounts originated in the U.K. The bonds were placed with a single buyer, according to market reports.
The €250 million Penarth 2010-2 transaction with a weighted average life of three years was priced at 78 basis points over the one month Euribor.
As for the other deal, it seems that Lloyds picked an opportune time for it to come to market with a deal backed by buy-to-let loans.
Standard & Poor's recently reported that U.K. buy-to-let deals have shown signs of stabilizing.
Delinquencies in this asset class fell for the first time in two years in the 2Q10, a sign that interest rate cuts are having some positive effect on credit performance in the sector, S&P said.
According to S&P, average total delinquencies for U.K. prime buy-to-let RMBS fell to 6.1% in the 2Q10 from 6.2% in the previous quarter, while riskier buy-to-let RMBS delinquencies fell to 17.1% from 18.6%, S&P said.
For more preliminary information on the buy-to-let transaction, please click the link below from the ASR Scorecards database.