UK Mortgages Ltd - UK Mortgages Limited Transaction

21 February 2017

UK MORTGAGES LIMITED

(A closed-ended investment company incorporated in Guernsey with registration number 60440)

The Board of UK Mortgages Limited (“UKML” or “the Fund”) and TwentyFour Asset Management LLP (“TwentyFour”) are pleased to announce that UKML has today completed the purchase of the existing pool of residential mortgages that was discussed in the Fund’s announcements dated 7 December 2016 and 3 January 2017.

In line with the structure described in UKML’s prospectus dated 23 June 2015, UKML invested in profit participating notes (“PPNs”) issued by its dedicated acquisition company (“Corporate Funding”) which has for settlement today, 21 Feb 2017, purchased a pool  (the “Purchase Pool”) of approximately £590.5m UK predominantly Buy-to-Let Mortgages (“BTL"), originated primarily between 2004 and 2008 by Capital Home Loans (“CHL”), then the UK specialist BTL mortgage lending arm of Permanent TSB.  CHL was sold to an affiliate of Cerberus Capital Management, L.P. (“Cerberus”) in July 2015. The Purchased Pool has also been purchased from another Cerberus affiliate. Following the transaction CHL will continue to service the mortgages, resulting in a seamless transaction for the mortgage borrowers.

The pool comprises 4,896 loans with an average balance of £120,610, and a weighted average indexed loan-to-value of 69.65%.  Given the age of the loans, which on a weighted average basis have almost 10 years of payment history encompassing the financial crisis, performance is very strong with just 0.92% of the loans more than one month in arrears.

This will be UKML’s third transaction and as previously advised, will deploy the Fund’s remaining investable capital. To supplement UKML’s funding for this transaction, and for ongoing financing purposes, Corporate Funding has established a loan financing facility with Bank of America Merrill Lynch which is available for up to 18 months, thereby providing maximum flexibility on the timing of the intended securitisation, which will provide longer term funding for the portfolio. Given current securitisation market levels, the estimated annualised return of this portfolio over its life is 8.28% gross* (assuming securitisation takes place as intended).

Prior to its acquisition, CHL was a well-known regular issuer in the securitisation market, having previously completed six publicly-placed and two retained transactions between 1998 and 2015.  All of the notes issued from previous transactions have been fully performing before, throughout and since the financial crisis.  Subsequent to CHL’s sale, Cerberus affiliates have completed two further securitisations, the most recent a £1bn transaction occurred this month.

Chris Waldron, Chairman of UK Mortgages Ltd said “The Board is very pleased that UKML has been able to fund this transaction and to deploy its remaining initial investable capital. A great deal of work has been completed by all sides to allow this transaction to take place. We look forward to adding further transactions and growing the Fund in the future.”

Rob Ford, Founding Partner and Portfolio Manager at TwentyFour said “We are very pleased that we have been able to complete this transaction. Whilst it has taken longer than originally hoped and anticipated to fully employ the Fund’s investable capital, this purchase now provides UKML with a firm footing from which to move forward and furthermore to grow as future opportunities become available.”

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