Clydesdale Bank is marketing £4.6 billion of securities backed by a pool of U.K. prime residential mortgages under its Lanark master trust.

This is the eighth rated issuance from the Lanark Master Trust, the most recent being the 2014-2 series issued in December.  The 2015-1 transaction is structured similarly to others in the series, with one major exception: 31% of the pool is comprised of offset mortgage loans. 

Offset mortgages require that the borrower hold a savings account with Clydesdale bank. Instead of receiving interest on the savings account borrowers can opt to have interest payments on the mortgage loan reduced, based on the net balance of the loan minus the savings account. The regular payment is calculated on the full amount of the loan, however, so making regular payments will pay off the loan faster than a standard loan with the same interest rate.  

The securitization structure therefore had to be modified to include a mechanism for Clydesdale Bank to compensate for the reduction in interest receipts, which Moody’s Investors Service stated in a presale report, added some “additional complexity to the structure.”

The  2015-1 series of notes will offer two Moody’s rated, ‘Aaa’  tranches, each structured with legal final maturity date of December 2054.

Citigroup and Bank of America Merrill Lynch are the lead arrangers on the deal.

The pool, like previous RMBS issued from the trust has a relatively low weighted average loan-to-value ratio of 65.7%, compared with approximately 65% across the U.K. RMBS Master Trust sector, according to the presale report.  The loans pool are also well seasoned, with an average payment history of 3.5 years.  

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