For institutional investors in Sweden

ABS quick view: Tower Bridge draws a crowd for the new year

Ian Bettney

Ian Bettney

Portfolio Manager

17 Jan 2022

European securitisation markets are out of the blocks for 2022 with the pricing of Tower Bridge 2022‑1, a UK residential mortgage‑backed securities (RMBS) transaction, backed by buy‑to‑let and owner‑occupied mortgages originated by Belmont Green under the Vida Homeloans brand.

This transaction was welcomed by market participants after an accelerated year‑end issuance wind down and new year hiatus, following the emergence of the Omicron variant.

Belmont Green has been originating buy‑to‑let mortgage loans since 2016 and we have engaged with their team since the early days of their business. Until 2021, we viewed them as being in a period of establishing operations while targeting rapid growth of originations and decided not to invest until we saw sufficient track record and stabilisation of the business.

Following the onset of COVID‑19, corporate strategy became focused on obtaining a UK banking licence to ensure liquidity in stressed conditions. This resulted in senior management changes, improved governance, more cautious risk appetite, greater controls on underwriting, and enhanced broker engagement – all of which had our support.

The latest transaction was well received by the market with high levels of oversubscription and margins tightening from initial guidance, showing strong demand for the paper. Last reported oversubscription multiples – following several rounds of tightening, were still healthy at 2.5x on the AAA rated class, 6.6x on AA, 6.7x on A and 4.9x on the BBB.

Total primary issuance in 2021 in the European securitisation markets beat post‑crisis records ending the year at €105 billion (bn). The previous post crisis peak being €100 million set in 2019. UK RMBS issuance was also up at €26bn from €15bn in 2020, with heavy issuance expected over the first quarter of 2022. We anticipate continued levels of high investor demand to meet supply at the start of 2022, which has got off to a strong start with five further RMBS deals being announced at the time of writing.

These are the views of the author at the time of publication and may differ from the views of other individuals/teams at Janus Henderson Investors. References made to individual securities do not constitute a recommendation to buy, sell or hold any security, investment strategy or market sector, and should not be assumed to be profitable. Janus Henderson Investors, its affiliated advisor, or its employees, may have a position in the securities mentioned.


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