Uk Mortgages Investors - UKML

Uk Mortgages Investors - UKML

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Stock Name Stock Symbol Market Stock Type
Uk Mortgages Limited UKML London Ordinary Share
  Price Change Price Change % Stock Price Last Trade
-0.50 -0.7% 70.70 16:35:18
Open Price Low Price High Price Close Price Previous Close
70.40 70.40 70.40 70.70 71.20
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rambutan2: More welcome news: Agreement to Dispose of Two Portfolios Under Revised Strategy The Board of UK Mortgages Limited ("UKML", or the "Company") and TwentyFour Asset Management LLP ("TwentyFour") are pleased to announce that on Friday 5th February 2021, UK Mortgages Corporate Funding Designated Activity Company ("UK DAC") signed agreements under which, Godiva Mortgages Limited ("Godiva"), a subsidiary of Coventry Building Society ("Coventry") has made a commitment to purchase two buy-to-let mortgage portfolios originated by Godiva and currently financed within the Cornhill No.6 and Malt Hill No.2 vehicles. Subject to successful completion, the timing of these sales is expected to coincide with the payment dates in February and May 2021 respectively. Strong market conditions have enabled these portfolios to be disposed of at economics that improve on those indicated to investors in late 2020 and also ahead of anticipated timing for the Cornhill No.6 portfolio...
rambutan2: From Dec factsheet: ...The price of the entire deal (Hops Hill No.1) improved by almost 20bps, and with leverage on the transaction in the high teens, that’s an incremental return for the fund of between 3.5% and 4%, compared to the level signalled to investors in last year’s presentations and gives a resulting IRR likely to be in excess of 15% once the pre-funding is completed in May – an notable achievement given the high quality of the loans, and most importantly a significant boost for delivering returns to fund investors going forward... hTtps://
rambutan2: Excellent: UK Mortgages Ltd: Highly Successful Securitisation Completed for Keystone Portfolio 18 January 2021 The Board of UK Mortgages Limited ("UKML") and TwentyFour Asset Management LLP ("TwentyFour") are pleased to announce that the launch and pricing of Hops Hill No.1 PLC, the debut securitisation of a portfolio of first ranking, Buy-to-Let mortgage loans originated by Keystone Property Finance ("Keystone"), was completed on Friday afternoon following two and a half days of roadshow meetings and a further two days of book building. The transaction, the first UK RMBS deal to be launched in 2021, was a major success. Practically, the deal has been ready for launch since early November last year, but as the year-end approached and the resolution of a number of broader uncertainties became apparent, such as the approval and roll-out of vaccines, it became strategically beneficial to hold off until the new year. This also allowed the portfolio to grow further as ongoing origination flowed into the pool of loans, thus also allowing for a larger transaction. Rather than the £350m originally envisaged last year, we were able to come to market with a transaction totalling £400m. This includes £63m of pre-funding loans - essentially allowing the deal to incorporate loans currently in the pipeline but not yet completed - the first deal to contain this feature since the start of the pandemic. The deal saw strong demand from a broad range of investors, and notably many more than have typically been seen in recent transactions, with the book building to over 3.4x oversubscription for the senior notes and more than twice that for the mezzanine classes. This allowed pricing to be tightened by an impressive 15bp from initial guidance on the senior notes, which were priced at a spread of Sonia+95bp, while the mezzanine notes were also tightened by 25bp or more during the process. Much of this demand was driven by the exceptional quality of the loan portfolio that Keystone has originated - loans not previously seen as an entire transaction by securitisation investors - as highlighted by the exceptional performance of the pool during the payment holiday period last year. Moreover the overall improvement of nearly 20bp achieved by the transaction compared to the level anticipated when the board and manager met with investors last year, will significantly improve the expected returns for the fund, once the pre-funding is completed at the first Interest Payment Date in May. Further details on these returns and the securitisation will be presented to investors in early February. Chris Waldron, UKML's chairman said: "This is an excellent deal for UKML and will make an important contribution to meeting the revised goals we set during our strategic review late last year." Rob Ford, portfolio manager at TwentyFour, said: "We are delighted with the outcome of this transaction, which saw unprecedented investor demand highlighting the high quality of the loan pool and securitisation structure. Additionally, the outstanding pricing performance combined with the larger deal size will further increase returns for UKML shareholders. We will now move on immediately to the task of finalising the follow-on warehouse to enable the company to build the next portfolio that will ultimately form Hops Hill No. 2."
yieldsearch: Shareholder list, I have the following Premier Fund Management 10.22% Quilter Investors Ltd 5.63% Seneca IM 5.07% BMO AM 4.99% Morningstar IM 4.69% Fidelity 4.46% Brooks Macdonald AM 2.49% Seems that all of those are institutional/passive investors, similar to MAGIM or 24AM. Under rule 8.3 of the takeover code, I believe any shareholder above 1% will have to disclose its holding, so expect a number of regulatory notices going forward. Bid price: Thank you MAGIM for explaining to shareholder that you bid is at a premium to the vwap or the recent closing price (duhhh..), 67p is also 15.6% discount to the reported NAV disclosed in the factsheet dated 29th may (with apparently based Nav from 30.04?). I would expect the actual NAV to be higher as credit markets improved since April/may. eg they were able to launch oat hill 2. The actual realisation price is likely higher than the NAV, as the asset manager is most likely "massaging" the NAV overtime to reduce volatility. All the underlying rmbs deals cash flow (oat hill etc) can be easily priced with sophisticated models (eg INTEX calc for instance) and would expect MAGIM do have done so, and get their own estimate of realisation price. Why on earth the board is not posting an updated NAV today for the shareholders is just something i cannot understand. Finally, this notice is also cleansing any existing shareholders being already privy to the discussion. MAGIM most likely already approached some large investors during their multiple bids process. So it can also be viewed as a way to get the confidential information received by those investors to make it to the public. and allow them to trade. So all in all, good news to see the share price movement,and probably focus the attention of 24am becos they may loose some asset management fee paying a relatively poor job, however i am not sure the 67p is the best price that can be achieved. Lets hope that MAGIM created some interest from private equity bidders. Any other bids would comfort the board action but would kill M&G bid. And the put up or shut up timeframe is relatively short (17th Aug, barely a month, during covid summer..)
aib1967: I guess it depends how much cash get's 'released' post the Oat Hill 2 securitisation, and how much you believe in the stated NAV calculation. I' guessing 24AM and the Board see upside from 67p. Performance to date hasn't been great I guess. With the company effectively fully invested for now and only refinancing's to be done down the road it's kind of a run-off / return cash to investors over time situation anyway. 24AM/UKML and M&G are effectively competitors in the market for UK resi mortgage pools so from M&G's view point it would be great to get hold of the UKML stakes in these pools. From memory the shareholder list is relatively concentrated for UKML?
rambutan2: From April factsheet: ...In order to assess the potential impact on the portfolio we have evaluated a stressed scenario, in line with the recent guidance from the BoE for IFRS9 ECL provisioning. We expect to update this officially in our June-2020 year-end financial reports, by which time many payment holidays will have ended and payment resumption behaviour will be available to be analysed, but the current scenario analysis is designed to provide guidance to investors. Put simply, for losses on loans to be realised, a combination of two things are required. Firstly, a property must be repossessed (because the borrower has stopped paying), and secondly it must then be sold (including costs) for less than the value of the loan – this would typically be caused by falls in house prices. All our portfolios have relatively conservative LTVs (see the table below) which offers significant protection against a fall in property prices. For example, Coventry don’t lend higher than 75% LTV and cap at 50% for larger loans. Whilst TML lend up to 90% LTV, this is only available for higher quality applicants and furthermore all loans are repayment mortgages so the LTV reduces over time. In the Barley Hill securitisation for example just 1.3% of the loans are in the 85% - 90% LTV bucket, and over 60% of loans that have taken a payment holiday are <75% LTV. At the time of writing, payment holidays had been granted to just over 18% of our overall portfolio, just a 1% increase from last month, with new requests now at very low levels. This is almost exactly in line with the current industry-wide experience according to the most recent figures from the FCA. History has shown that unemployment is typically the biggest driver of mortgage foreclosures. Looking back at the last two recessions, this peaked at 10.6% in the early 1990s and 8.43% in the last crisis. These levels of unemployment led to cumulative (over 5 or 6 years) foreclosure levels of around 2.75% and 2.2% respectively. Whilst the Covid-19 circumstances are unusual, and there is a likelihood of far greater forbearance, it would not be unrealistic to assume a worst case unemployment rate of a similar metric. Rounding up our payment holiday population (the most likely to default) to 20% and applying a 10% unemployment rate to those loans, would therefore lead to a projected foreclosure rate of 2%. Similarly, house price declines were at their worst during those periods, with national falls of around 25% and 20% respectively. The BoE’s recent credit conditions report suggested potential stressed house price falls of 15% could be seen following the pandemic. However, unpaid interest and costs could increase the net reduction in value in the event of a foreclosure and sale, so for these purposes we have added a further 10%, giving us a 75% LTV breakeven. Given the low LTVs in our portfolios, a 25% value reduction would realise very few losses, as our average LTVs are all below 75%, but in a stressed scenario it would also be prudent to assume that most losses occur on the higher LTV loans. In our overall portfolio around 17% of our loans are above 80% LTV, and that cohort has an average LTV of around 84% which we can round up to 85% to be conservative. So directing all foreclosures to loans above 80% LTV would give a Loss Severity on those loans of 10% (85% LTV – 75% breakeven). Applying a 2% projected foreclosure rate would therefore create a Loss Given Default of 0.20%, which on our portfolio of just over £1.6bn of loans would then lead to a stressed-case loss of around £3.3m. Given that our current ECL forecast (based on normal pre-Covid-19 market assumptions which would be superseded by these new assumptions) already provisions for almost £1.5m, we highlight that the above stressed scenario would lead to a modestly increased provision of about £1.8m, or less than 0.7% of NAV. htTps://
rambutan2: COVID-19 - Securitisation Market, Mortgage Market and Fund Update Since the Board and Portfolio Manager last updated investors in our interim financial statements published on 19th March, financial markets have continued to be extremely volatile as the Covid-19 pandemic has intensified. Spreads in RMBS and ABS markets have widened significantly and primary markets have essentially shut down. Despite very recent rallies in equity markets and some similar signs in broader credit markets, ABS markets have widened and remain close to their lows, and with spreads at extreme levels new issuance is not likely to return in the near term, particularly from the banking sector where government/central bank funding schemes have given the banks almost unlimited amounts of extraordinarily cheap funding. Whilst this additional funding is likely to be positive for RMBS spreads in the medium term, as it was in 2016 when the first TFS scheme was created following the Brexit vote thereby almost eliminating the banks' needs for capital markets funding, in the short term the effective shutdown of the country and its consequences for the economy remain the focus of attention and spreads are likely to remain at elevated levels. As was mentioned in the Company's interim financial statements, this means there is a significant possibility that a refinancing in the public markets of the Oat Hill No.1 transaction, which reaches its first refinancing date near the end of May, will not be possible given the relatively short timeframe for any recovery to take place and for those markets to reopen. For the avoidance of doubt the existing funding remains secure, as the current Oat Hill securitisation can remain outstanding, albeit at an increased cost, and this would still allow the Company to revisit the securitisation refinancing or a warehouse option in the future, as the deal is able to be refinanced on any future quarterly interest payment date. As also mentioned, and with this in mind the portfolio managers have continued to explore alternative short-term solutions which would allow the securitisation plans to resume when market conditions improve. This might, for example, be in the form of a short-term warehousing facility with one or more banks to be entered on or about the May 2020 interest payment date of Oat Hill 1. However, given current market conditions, it is unlikely that such a solution will allow the mezzanine funding that had been planned for the securitisation, and therefore any capital release would be greatly reduced. In this case, any capital release would not be forthcoming until a public refinancing was subsequently completed. The uncertainty over the timing and cost of future funding is mirrored by uncertainty in the mortgage market. Specifically, we do not know at this point how future cash flows will be affected by mortgage holidays or other forms of relief that will be offered to distressed borrowers. It is possible that direct government support to employees and now to the self-employed will be sufficient to maintain mortgage payments at, or close to, contracted levels. At the very least, as this relief will take some time to implement, it does provide the backup to help them make up the forbearance measures once the crisis has abated. With regard to future loan origination, it is reported that UK Finance and the UK banks are in discussions with the government on whether the mortgage/housing market itself can continue through the current shutdown. Despite the massive liquidity stimulus, banks and other lenders are removing mortgage products from their offerings and/or putting up mortgage rates. Physical property valuations are no longer possible due to the lockdown and the likelihood of any significant number of house purchases completing in the next few months has plummeted. For loans in our pipeline, this means that other than those loans which are re-mortgages and are currently close to completing, most will likely be delayed. For purchases, those where contracts have already been exchanged may complete, but many may not, and many others are likely to be delayed. For the Company this will mean that loan growth will stagnate in short term, but with both the TML and Keystone portfolios having healthy balances of around GBP200m, and efficient leverage, they will continue to generate income for UKML during the shutdown. Our funding warehouses for these portfolios are long term and so will have ample opportunity to grow again, once lending restarts. However, in the short term, the Board and the Portfolio Manager are revisiting the Company's cash flow models to incorporate these unprecedented conditions. The principal concern will be the extent to which these models continue to justify paying an uncovered dividend in the near term, particularly if the intended refinancing of Oat Hill is delayed. The Board intends to give a further update to shareholders next week. htTps://
rambutan2: One of my diversifiers: UKML Portfolio Update UKML's deals continue to perform very well. The latest factsheet details underlying asset performance, but as mentioned above market spreads have been tightening and all UKML's deals have performed well in the secondary market too. Oat Hill is getting closer to its call date and is trading at a small premium to par, but even given the short dated nature, its spread has tightened by over 20bps in the last few months. Malt Hill 2, our second Coventry securitisation, is now trading inside 3m L+70bps, and Barley Hill 1, our first securitisation from TML, is bid at around 3m L+75bps. Both these levels are tighter than where the deals originally priced, and are about 25bps tighter than where they were about 3 months ago, boding well for future securitisation plans later this year, when we expect the new TML pool to be ready for a second deal. Both our warehouses continue to grow well, with the TML portfolio over GBP180m and the Keystone pool over GBP170m of completions. Both have been consistently adding >GBP20m and >GBP15m of loans per month respectively since Q4 of last year and their pipelines continue to grow. Every month, these volumes are currently increasing our net income by an equivalent of around GBP600k per annum, helping to reduce the gap to outgoings and ultimately helping us to move closer to a covered dividend position. Details of further growth will be available in future monthly factsheets and we will update investors on any securitisation timing and details as soon as we are able to.
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