UKML.L Regulatory News (UKML)

UK Mortgages Ltd - Dividend Commentary

PR Newswire

London, April 7

7 April 2020

UK Mortgages Limited

(a non-cellular company limited by shares incorporated in the Island of Guernsey under the Companies (Guernsey) Law 2008, as amended, with registered number 60440 and registered as a Registered Closed-ended Collective Investment Scheme with the Guernsey Financial Services Commission. LEI: 549300388LT7VTHCIT59)

Dividend Commentary

Following the update to investors issued on Friday 27th March, the Board of UK Mortgages Limited (“UKML”) has been working closely with TwentyFour Asset Management, the Company’s Portfolio Manager, to assess the likely effects of mortgage payment holidays and other forbearance measures on its portfolio. The Portfolio Manager has modelled a range of scenarios and it is clear that these measures will lead to a reduced level of income in the near term, but the extent and duration of these is impossible to quantify at this stage.

Whilst it is currently expected that the vast majority of forbearance granted will be repaid, the timing and mechanism of these repayments is not clear at this early stage and likely to vary across the Company’s loan pools depending on loan type, borrower type and the lender’s loan servicing policies, plus the unknown of any future governmental guidance. We also have to be mindful that a period of higher than previously expected arrears may follow the end of the current economic paralysis.

The impact of forbearance measures may be reduced, should the government introduce aid for the non-bank mortgage lenders in the way that it has already done for the banks. Nevertheless, the considerable uncertainty over income levels in the immediate future has made it necessary for the Board to reassess the Company’s dividend policy.

The Board has therefore today declared a quarterly dividend of 0.375p per share, a reduction from the 1.125p level of previous quarters, but a level intended as a minimum for future dividends. To the extent that the income generated by the portfolio provides the ability to pay a dividend in excess of 0.375p from generated income the Board would consider this. It is expected that the previous level of distribution (1.125p per quarter) will be restored when this period of market dislocation has passed.

A return to more normal markets would allow for the refinancing of Oat Hill 1, which we have referred to extensively previously, as well as further subsequent securitisations of our forward flow origination pools, all of which will improve the cash position further. Such a return, and a term securitisation refinancing of Oat Hill 1 should generate a significant capital release, which the board would use to buy back shares.

The prospects for these are covered in more detail in a video update from TwentyFour Asset Management which will also be released today and made available at www.ukmortgageslimited.com

For further information, please contact:

Numis Securities Limited: Nathan Brown +44 (0) 20 7260 1000Hugh Jonathan

UK Mortgages Limited:John Magrath +44 (0) 20 7015 8900Alistair Wilson