U.K. lender Paragon plans to issue £350 million ($483 million) of bonds backed by first-lien buy-to-let home loans.
Buy-to-let mortgages fund the purchase of residential properties in the U.K. that will be rented. The deal is the nineteenth issued under the Paragon Mortgages label. Llyods Bank, Macquarie Bank (London Branch) and Morgan Stanley are joint lead managers on the deal.
Moody’s Investor Service has assigned preliminary Aaa’ ratings to the class A notes, Aa2’ratings to the class B notes and A1’ ratings to the class C notes. The capital structure also offers a class D tranche that is not rated by Moody’s.
The structure allows additional loans to be added to the pool before July 31, 2014. According to the Moody’s presale, prefunding in the deal will equal 5.3% of the pool. It said that prefunding adds risk to the transaction because the asset quality of the loans could deteriorate compared to that at close.
Also unique to Paragon’s latest deal is that 19.3% of the loans in the final pool will be repurchased from First Flexible No.4 plc, an existing RMBS securitization that closed in 2001.
The maximum loan-to-value ratio of loans included in the pool is 75%; that's down from 85% for prior Paragon deals. The average original, current and indexed LTVs are all below 70%, which Moody’s said compared “favorably with the overall buy-to-let market.”