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£2.5Bn RMBS deal for Co-op Bank

The Co-operative Bank has laun-ched and priced its first prime residential mortgage-backed securi-ties deal in a transaction worth £2.5bn.

The Silk Road Finance Number One programme is made up of a pool of prime mortgages originated by Britannia, which merged with The Co-operative Bank last August. Both businesses are now part of The Co-operative Financial Services brand.

The deal was priced at three-month LIBOR plus 1.4% and is expected to be AAA-rated by Fitch and Moody’s.

Out of the £2.5bn total, £1bn was placed with an affiliate of JP Morgan Securities, £375m was publicly placed with investors and around £1.13bn was retained by The Co-operative Bank.

Raj Bhatia, treasurer at The Co-operative Bank, says: “We are de-lighted to have launched this successful transaction. We were pleased with the response from in-vestors who appreciated the high quality mortgage portfolio that collateralises this transaction.

“The issue provides term funding for us and the establishment of this funding platform is consistent with our strategy of maintaining access to diversified sources of funding.”

This is the second public RMBS deal this year. The first was issued by Lloyds Banking Group under its Permanent programme. The issue was also worth £2.5bn and comp-rised four tranches offering assets priced in pounds, euros and US dollars.

Tony Ward, chief executive of Home Funding, says that The Cooperative Bank’s issue is unsur-prising given that Britannia and its former broker arm Platform had experience of securitisation deals.

He says securitisations are one of the few funding options left for len-ders, particularly when government support initiatives such as the Special Liquidity Scheme are due to close in 2011.

He says: “The only issue with building societies and securiti-sations is the problem with member loans, as securitisations transfer beneficial ownership to another entity. Securitisations are a bit more cumbersome for building societies, but they can do covered bond iss-uances which are similar.”



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