Kensington Mortgages has completed a £548m residential mortgage-backed securities transaction.
The securitised loans were selected to include only owner-occupied, high LTV loans recently originated by the specialist mortgage lender.
Kensington has been an active RMBS issuer in the UK market but it has been absent from the public securitisation markets for two years.
In March, it was purchased by Barclays Bank UK PLC. As part of the acquisition, Kensington continues day-to-day business operations as usual, supporting a broad range of borrowers that the High St would typically not serve.
The securities transaction, which was completed yesterday (1 December), is the first public deal under Barclays ownership.
This trade has been designed by Kensington to de-risk a portfolio of mortgages from Barclays’ balance sheet rather than to raise funding for the business.
Kensington started the marketing of this bond in early November, privately placing the residual consideration and the unrated bonds to third party investors.
It publicly announced the deal last Friday to the markets in order to achieve a more broadly syndicated process for the remaining mezzanine notes. Barclays is retaining the senior notes of this securitisation.
The lender said the reception from the markets was strong from the beginning of the process across all offered tranches. It resulted in high coverage levels for the Class B to E notes, being respectively 5.1x, 6.8x, 5.0x and 2.9x oversubscribed at IPTs.
Coverage reached on average 4.3x at final terms, and pricing tightened on average by 40bps from IPTs to land at DMs of +160bps, +245bps, +350bps and +535bps respectively for class B, C, D and E notes.
The final levels across mezzanine notes ended up inside all recent UK RMBS mezzanine notes placed by UK issuers this year. Kensington also enjoyed a very diverse orderbook with 10 unique investors allocated for a total of £70m notes offered.
Kensington Mortgages capital markets & digital director Alex Maddox said: “This deal is a successful first public trade for Kensington under Barclays’ ownership; we have managed to attract significant and granular orderbooks, with depth and variety of the investors involved.
“This demonstrates a continued level of confidence from investors in the Kensington platform. The strong position we have built over the years in the UK RMBS market has helped us print an excellent transaction, pushing spreads across mezzanine notes to their tightest levels since April 2022.”
