(Alliance News) - Arbuthnot Banking Group PLC said Wednesday its principal banking subsidiary, Arbuthnot Latham, has agreed to purchase a portfolio of residential mortgages for GBP258 million in cash.
The mortgages are being acquired from Raphael Mortgages Ltd Designated Activity Co and Magellan Funding No2 Designated Activity Co. Arbuthnot expects the deal to be completed on August 8.
Arbuthnot said the Raphael portfolio has been in run off since it was originated by subprime lenders Edeus Mortgages and Victoria Mortgage Funding between 2005 and 2008.
Both lenders were liquidated about a decade ago in the height of the financial crises. Edeus was sold to private equity firm Elliot Associates in 2008 and changed its name to Exact Mortgages. Ultimately, Exact Mortgages ended up under the umbrella of London-listed Charter Court Financial Services Group PLC.
According to media reports at the time, Victoria was the first UK subprime lender to close its doors due to credit pressure created in the sector from the financial crisis.
The second portfolio was originated in 2018 and 2019 by Magellan Homeloans. In March this year, Megallan Homeloans closed to new business, citing an "unsustainable" market.
Arbuthnot said both portfolios are "geographically distributed" around the UK.
At March 31, the Raphael portfolio consists of 1,457 loans with customer balances of GBP201 million. The portfolio is 20% buy-to-let with the remainder owner-occupied with an average loan-to-value of 67.4%.
The Magellan portfolio consists of 462 loans with customer balances of GBP65 million. All of the Magellan portfolio is owner-occupied with an average loan-to-value of 70%.
The overall yield on the portfolios is 3.6%.
"It is expected that in due course the group will preposition these assets with the Bank of England to act as collateral for the schemes within the sterling monetary framework. It is then expected that these assets will then be included in the group's liquidity resources," Arbuthnot added.
Shares in Arbuthnot Banking were down 0.3% in London on Wednesday morning at 1,331.00 pence each.
Arbuthnot (ARBB)