Santander UK's next prime RMBS set for USD-only issuance

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Santander UK’s 27th securitization from its prime UK residential mortgage portfolio will bypass the local currency to issue its latest series entirely in U.S. dollar-denominated notes.

According to a presale report from Moody’s Investors Service, the Holmes Master Issuer plc 2018-2 will include two new Series A1 and A2 bond tranches with sizes to be determined. The A1 tranche will be a one-year money-market series with a preliminary P-1 rating from Moody’s, while the triple-A-rated A2 notes will be term notes with a final legal maturity of 2054.

The bonds will be backed by a pool of 51,791 loans that were mostly issued between 2006 and 2008, with a collective outstanding balance of £5.2 billion (US$6.7 billion). All the mortgages were originated by the predecessor institution of Santander UK, Abbey National plc, a building society that was acquired by Banco Santander in 2005 and later merged with Bradford & Bingley to form Santander UK.

Previous deals have commonly issued multicurrency note tranches in pound-sterling and U.S. dollar denominations, including Santander’s 2018-1 series in March that totaled an equivalent of £985 million, backed by loans totaling £4.5 billion.

The last single-currency issue from the trust was a £500 million series issue in 2017, absent of U.S. dollar notes.

The deal is the second issuance this year from the master trust, following Santander’s 2018-1 series that totaled an equivalent £985 million capital structure featuring multicurrency notes in both pound-sterling and U.S. dollar denominations. That transaction was backed by loans totaling £4.5 billion.

A slight majority of the loans (51.4%) in the new 2018-2 series were advanced on an interest-only basis, building a collateral pool with a weighted average loan-to-value ratio of 60.6% — a lower mark than the average 64% in other UK prime RMBS master trusts, according to Moody’s.

The average interest rate of 2.48% are from a blend of fixed-rate, standard variable-rate and tracker rates (which commonly follows the Bank of England’s base rate).

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