Sectors > Top Reports > Together Memo 070219

Together Memo 070219

Substantial liquidity shortfall and impairments in risky bridge and complex Buy-To-Let lending - Short Bracken Midco 1 PIK-Toggle 8.875% 2023
PUBLISHED: 07 February 2019
PAGES: 328
SUBMARKET: Together, Top Reports, Top Reports,


Why Read?

  • Understand how loan putbacks to Together from its securitisation conduits would rise to c. £700m if house prices decline 20%+, causing a liquidity problem
  • Understand how liquidity stress would be further exacerbated by cash trapping in Together’s securitisation conduits and lengthening behavioural maturities of securitised loans relative to the short-dated maturities of Together’s securitised notes
  • Understand why bridge loans and specialist/complex buy-to-let (BTL), both a substantially increased proportion of Together’s loan book over the past 5 years, are high risk

What’s New?

  • Deep dive on Together’s securitisation facilities and liquidity risks posed by these
  • Analysis of risks in bridge lending with case studies on failed bridge lenders
  • Analysis of risks in specialist/complex BTL lending and how bridge-to-let/term can be a way to hide “hung” bridges which cannot be repaid at maturity
  • Competitive landscape analysis for each of Together’s lending niches
  • Analysis of structural growth in UK specialist lending
  • Analysis of how and why UK specialist mortgage lenders have failed previously (early 1990s and post 2007) and how the current boom in specialist lending compares to these Waves 1 and 2

Questions Answered

  • Is Together’s loan to cost ratio closer to 100% on bridge loans?
  • Is bridge-to-term a way to hide hung bridges in the BTL segment?
  • Will Together really be profitable on a through-the-cycle basis given the increased prevalence of bridge loans and specialist/complex BTL in its loan mix?
  • Every prior generation of specialist mortgage lender has failed at the first downturn in housing. Is this time different?
  • How can Together reduce its liquidity risk?
  • How does Together compare with other competing or comparable specialist lenders and banks?
  • How should Together’s equity be valued and what is it worth?
  • What recovery rate should we expect on Together’s Senior Secured Notes and on the Bracken Midco 1 Plc Senior PIK-Toggle Notes?

0. View, Variant Perception & Recommendations

0. Group Structure & Capitalisation

1. Business

2. Securitisation Facilities

3. Accounting Specificities

4. Cash Flow

5. Banking Lens View

6. Bridge Lending Risks

7. Puzzle - Is Together Too Good To Be True?

8. Financial Projections & Valuation

9. Competitive Landscape

10. Structural Growth

11. M&A

12. Previous UK Specialist Lending Booms





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