Bradford & Bingley, the U.K. bank with £21 billion in residential mortgages on its balance sheet, will start issuing securitized bonds from its new master trust in September, according to Peter Green, director of treasury and balance sheet management in Bingley. He would not specify the size of the offering, saying only that B&B plans to issue between £2 billion and £4 billion annually through the trust, which is arranged by Credit Suisse First Boston and HSBC. The bonds are likely to be backed in large part by buy-to-let mortgages, which constitute £13.6 billion of the bank’s portfolio.
B&B diversified its ongoing funding away from unsecured debt earlier this year, issuing its inaugural €2 billion five-year covered bond in May. “The reason we did a covered bond first was due to the lower cost of funds; we’re doing a master trust now to further diversify our funding, as covered bonds and securitizations reach entirely different investor bases,” said Lyndon Horwell, acting head of capital markets at B&B, who explained the mortgage lender had always planned to use secured alongside unsecured funding. He reasoned that other banks like Halifax Bank of Scotland and Northern Rock did master trusts before issuing covered bonds because covered bonds were only invented in the U.K. last year.
B&B is not new to the securitization market, having issued two residential mortgage-backed deals through Aire Valley Finance--one in 1997 and another in 2000, which was the largest securitization of buy-to-let mortgages to that date.
