Liquid real estate Issue 05
UK mortgage lenders try to shore up funding
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Alliance & Leicester are lining up funding for 2008 |
To avoid falling victim to the funding crisis that brought about Northern Rock’s downfall, Alliance & Leicester has put in place additional funding facilities, a large proportion of which are backed by its residential mortgage assets. According to Alliance & Leicester’s 2007 results statement released in February, these new facilities have enabled it to fund all its customer loans and advances with customer deposits and wholesale funding with a duration of more than six months. The lender started this process at the end of 2007 and has now pre-funded its maturing medium-term wholesale funding, commercial paper and certificates of deposit into the first quarter of 2009.
This coup comes just in time, as Spain’s Grupo Santander is said to be waiting in the wings to add Alliance & Leicester to its UK portfolio. Only a few details are available of how Alliance & Leicester has accomplished the feat of stabilizing its funding situation in what have been horrible market conditions. In addition to reports of a £4 billion two-year financing from Credit Suisse backed by part of its mortgage book, the Midlands-based lender has secured £10 billion from a consortium of banks. The £10 billion comes from a static securitization of prime mortgages Alliance & Leicester has put in place called Bracken. That deal was used as collateral for different facilities and represents a large chunk of the lender’s on-balance-sheet mortgages. A bank spokeswoman did not return calls seeking comment.
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