Uk Mortgages Share Discussion Threads

[future financier] 12/8/2020 10:26

Down 2p so far

[irishmatt] 12/8/2020 10:14

What price movement?

[future financier] 12/8/2020 09:59

Looks like M&G are going to lose out - looking at the price movement today - opportunists getting their just deserts.

[yieldsearch] 07/8/2020 17:33

- Dividend
interim dvd of 1.5p for y end 30 jun 2020
for quarterly dvd of 1.125 ( 7.1% dvd yield on current 63 price)
- Strategy
review of future strategy, expected in oct 2020. everything considered from reconstruction/growth to orderly winding down
- MnG offer not high enough

[horndean eagle] 24/7/2020 13:24

Odd that m&g actually want to make any offer at all given the way they slag the company off. Another couple of pence and I reckon they can win the day.

[stun12] 24/7/2020 09:36

M&G responds to UKML's dividend announcement

[rambutan2] 23/7/2020 21:05

Agree. And here's the latest factsheet:

[horndean eagle] 23/7/2020 18:39

NAV update out today. About 80p. They are talking about driving the discount to sub 5%. That is going to take more than £30m. At which point they might look at the asset base being whittled away and throw in the towel. Should be decent upside from here whichever route is taken.

[yieldsearch] 22/7/2020 20:56

muted reaction no?

[rambutan2] 22/7/2020 20:27

A catalyst indeed:

Share Buyback Programme

The Securitisation was issued on terms which will release a significant amount
of capital, allowing the Company to be able to commence buying back shares once
the transaction settles at the end of August 2020 (the "Settlement Date").

The Company announces that with effect from the Settlement Date it expects to
initiate a share buyback programme to purchase up to the maximum of 14.99% of
the Company's issued shares, being the maximum number of shares currently
authorised by Shareholders, if a discount of greater than 5% persists to the
Company's then prevailing NAV per share.

Dividend Policy

In light of the portfolio performance observed as the UK lockdown begins to
ease and the successful Securitisation, the Board announces that it intends to
restore the Company's dividend to its target level of 4.5p annually per share,
which represents a dividend yield of 7.0% based on the closing share price on
20 July 2020.

The Board therefore currently intends to declare:

* an additional interim dividend in respect of the Company's year ended 30
June 2020 of 1.5p per share; and

* four quarterly dividends of 1.125p per share in respect of the Company's
current financial year to 30 June 2021.

[aib1967] 21/7/2020 07:32

Thanks for the shareholders list. It's a fairly eclectic list. I wasn't sure if M&G were already a shareholder but it would appear not based on that list.

I think 24AM have been waiving management fees on this one or at least I seem to remember something along those lines given the struggles they've had to get the mortgages pools on board and to hit the original dividend target. You can definitely run all these mortgages pools/securitisations through a cashflow model but I guess the key thing is the assumptions you use, and the discount rate applied to those resulting cashflows. With payment holidays and a likely environment where repossessions are not 'encouraged' by government, and rising unemployment then it might mean you need to make different assumptions going forward which could change the NAV quite a bit. Hard to say right now given the changing landscape in the real economy / resi housing market.

[rambutan2] 21/7/2020 03:50

67p strikes me a stingy, but certainly acts as a catalyst. TwentyFour won't roll over without a fight as they have put a lot of time and effort into this mortgage platform and also have plenty of skin in the game.

Both players get a mention in this:

[yieldsearch] 20/7/2020 20:32

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] 20/7/2020 15:04

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?

[horndean eagle] 20/7/2020 13:42

Don't imagine it would or should be that difficult to garner enough support to push the deal through. Performance has been dire and a cash exit welcomed. Alternative is for them to push it into run off and return cash. Life as normal very unlikely I would have thought.

[rambutan2] 08/7/2020 12:18

Good news.

[yieldsearch] 08/7/2020 11:03

Oat Hill 1 to be refinanced:
"Once completed this transaction will allow the company to return to its strategy as previously stated in February including using excess capital to enable share buybacks whilst the Company’s share price continues to trade at a discount to the NAV"

[rambutan2] 01/7/2020 21:42

May fact sheet:

[rambutan2] 09/6/2020 22:08

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.

[rambutan2] 08/4/2020 21:16

Bounce off the bottom today following some management reassurance:

[rambutan2] 28/3/2020 02:50

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.

[rambutan2] 26/2/2020 20:09

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.