Santander’s AA mortgage deal shows appetite for securitisation
BANKING group Santander UK said yesterday it had raised £2.25bn through a residential mortgage-backed securitisation deal.
The first AA-rated issuance by a UK institution since before the financial crisis was announced came just hours before the branch had its credit rating slashed by Moody’s.
Nonetheless, the UK arm of the Spanish bank has raised £5.25bn via asset-backed deals so far this year, with strong demand for this latest tranche, issued via its Fosse master trust programme.
The vehicle – which packages together a portfolio of prime residential UK mortgages sold by Alliance & Leicester – included two tranches of debt rated at AA.
Mortage-backed deals have been out of favour for several years after banks lost huge amounts of money on packages of subprime loans that had been given investment-grade rating.
But investors have slowly been returning to the securitisation markets in recent months, seeking highly-rated and transparent deals backed by stable sources of cashflow.
The Santander deal is made up of eight AAA tranches with a range of maturities and denominated in five different currencies including Australian and US dollars.
An extra set of notes, denominated in Japanese Yen, was added at the last minute to meet investor demand. “Securitisations form an important part of Santander UK’s balance sheet management, and so far this year, we’ve raised £5.25bn through vehicles such as today’s, backed by residential mortgages,” said Stephen Jones, finance chief at the bank.