Mars Capital Finance is returning to market with a securitization of U.K. nonconforming and reperforming owner-occupied and buy-to-let mortgage loans, according to Standard & Poor’s.
Citigroup is lead manager on the deal, called Thrones 2015-1.
Mars Capital Finance was established in 2008 and acquires performing and nonperforming mortgage loan portfolios to maximize their value by servicing these assets. Its business model is to act as legal title holder, servicer, and cash manager for portfolios of mortgage loans whose beneficial interest is held by special purpose entities.
The company completed its first residential mortgage securitization in 2013; it was last in the market in July 2014 with Thrones 2014-1.
Proceeds from this deal will be used to purchase mostly non-conforming, owner-occupied loans. In total, £297.6 million ($465.5 million) worth of loans will be purchased. Borrowers have either self-certified their income or are otherwise considered by banks and building societies to be nonprime borrowers, or who are applying the mortgage loan to purchase buy-to-let properties.
The mortgages have a weighted average loan-to-value ratio of 79.3%; 75.3% of the loans pay only on interest for all of their terms; 0.3% pay only interest for part of their terms;s and 24.4% are fully amortizing.
In its presale report, S&P notes that the high percentage of loans in arrears (42.2%) could subject the pool to liquidity risk on any given interest payment date. However, there are liquidity provisions in the transaction documents that mitigate this risk.
“The issuer can use the liquidity reserve before the general reserve fund, if available revenues are insufficient to pay senior expenses and interest shortfalls on the most senior outstanding class of notes,” the report states.
Additionally, the class B-Dfrd to E-Dfrd notes are deferrable-interest notes, which means that the issuer can defer interest payments on these notes without triggering an event of default.
While S&P’s preliminary AAA’ ratings on the class A note reflects its expectation of the timely payment of interest and the ultimate payment of principal; the rating agency’s ratings on the class B-Dfrd to E-Dfrd notes (which range from AA’ to BB’) addresses the ultimate payment of principal and the ultimate payment of interest.