Charter Court Financial Services Group PLC (LON:CCFS) today announced that its subsidiary Charter Mortgages Limited has agreed to sell its residual economic interest in the Precise Mortgage Funding 2019-1B plc securitisation to J.P. Morgan Securities plc for cash consideration of £6.2 million, payable on completion. The Transaction, which is expected to complete on 31July 2019, will involve the sale of the RC2 residual certificates to the securitisation. JPM managed the sale process and purchased the Certificates for onward sale.
The Transaction will generate a pre-tax gain of £28.8 million, which will be recognised in the 2019 financial year. It will also result in a reduction in the gross assets of the Group of c. £389.1 million1 and a reduction in risk weighted assets of c. £206.7 million. The associated increase in common equity tier 1 capital ratio through the reduction in risk weighted assets and the gain on sale will be reinvested to support new loan originations in Charter Court’s specialist lending segments and ongoing business activities. During the period between the issuance of the securitisation and 30 June 2019 the assets being disposed of contributed c. £1.3 million in profit before tax.
Commenting on the Transaction, Sebastien Maloney, CFO of Charter Court, said:
“This transaction demonstrates our proactive approach to asset-liability and capital management and our ability to execute capital markets transactions when we judge conditions to be right to generate incremental shareholder value. The demand for the Certificates and the final terms achieved further reflect investor confidence in the quality of our underwriting and our track record of strong loan book growth while maintaining a market-leading cost of risk.”
Background on PMF 2019-1B
PMF 2019-1B was issued on 31 May 2019 and securitised approximately £734 million of prime buy-to-let mortgages originated by Charter Court Financial Services Limited (‘CCFSL’). At the time of issuance, PMF 2019-1B sold all of the rated notes (classes A1, B, C, D, E and X notes to third parties independent of the Group, and the A2 notes to CCFSL), and Charter Mortgages Limited, a Charter Court group company, purchased the residual certificates pertaining to the transaction. It subsequently sold a sub-component of the residual certificates (the ‘RC1’s) earlier in July 2019 to a third-party investor independent of the Group. The Transaction will result in the de-recognition of the securitised mortgages and, as a liability, the rated notes (classes A1, B, C D, E and X notes) from the Group balance sheet.
The Transaction has been agreed today and will settle on 31 July 2019.
A copy of this announcement will be available on Charter Court’s website at: http://www.chartercourtfs.co.uk/
1 Includes £20.3 million of non-mortgage assets in PMF 2019-1B and reflects the recognition on balance sheet of £359.0 million of PMF 2019-1B class A2 notes retained by CCFSL
