Proof perhaps, that the BoE is ungumming the markets. HBOS closed on Wednesday a huge £9bn RMBS securitisation, issued under its Permanent Master Issuer trust. Alas no-one bought any of it. It’s a zombie RMBS. Not for sale.
The deal has eight class A series of notes, all rated Aaa by Moody’s and with a value of £8.5bn. There was also one class B set rated Aa3 and one class C set with a rating of Baa2, together worth £500m. Dow Jones reports:
An HBOS spokesman said the bank will retain the entire transaction, “giving us further funding flexibility”
Which must mean the structure has been designed specifically for use under the Bank of England’s special liquidity scheme.
Indeed, take a look at the terms of the deal, and it’s blatantly clear. Firstly, HBOS has written a call option into all of the new issues, which implies, even with a maturity in 2042, this is only being seen as short term transaction. Secondly, the notes are backed by a “substantial substitution structure” according to a Halifax spokesperson, which presumably was a key enhancement making the triple-A achievable.
And if all that wasn’t enough, we’re told the yield is “low” compared to current market levels.
Says Moody’s:
The high quality of the mortgage portfolio can be seen from the substantial average seasoning of the pool (39.99 months) and the low average loan to value of the mortgages in the Trust (61.11%). In addition, Halifax’s minimum interest in the Trust Property (”Minimum Seller Share”) provides support against the set-off risk and breaches of representations and warranties given by Halifax.
Halifax has a 19 per cent share in the Permanent Master Issuer trust.
