Together Memo 070219
- 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
- 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
- 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
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
12. Previous UK Specialist Lending Booms
One Savings Bank
Charter Court Financial Services
United Trust Bank
Cambridge & Counties
Foundation Home Loans
Hampshire Trust Bank
The Mortgage Corporation
National Home Loans
Household Mortgage Corporation BNP Mortgages
Bear Stearns Home Loans
The Mortgage Company
Platform Home Loans
Brittania Building Society
The Mortgage Works & UCB Home Loans Limited
Southern Pacific Mortgage Limited Salt
Amber Homeloans Limited Rooftop Mortgages
Accord Mortgages Limited Basinghall Finance
North Yorkshire Mortgages Limited Livingstone Mortgages Limited London Scottish Bank
Advantage Home Loans
DB Mortgages / DB UK
Unity Home Loans
The Money Store
London Mortgage Company