LendInvest has securitised £259 million (€286 million) of UK buy-to-let residential mortgages in a deal its chief executive said provides it with “funding that is cheaper than if we were a small deposit-taking bank”.
CEO Christian Faes described the residential mortgage-backed securities issuance, Mortimer BTL 2019-1, as a “milestone” for the London-headquartered online real estate lending platform. He said the deal “proves out our business model and its scalability”.
The senior tranche of the securitisation is priced at 130 basis points over the sterling overnight interbank average rate. LendInvest said that, in addition to reducing the cost of its funding, the RMBS frees up its capacity to provide BTL mortgage loans.
Although other fintech lenders have sold loans to investors such as hedge funds, which have then securitised the loans, this is understood to be the first time a UK fintech firm has completed such a securitisation itself. US investment bank Citi acted as sole arranger. Citi, BNP Paribas and HSBC acted as joint lead managers.
Rod Lockhart, LendInvest’s head of capital markets and fund management, told Real Estate Capital that the issuance was oversubscribed and “included some of the world’s largest bond fund managers”. He added that regular RMBS issuance could be expected from the firm, “roughly every six months, with larger issuance as we continue to scale our business”.
The company was launched in 2008 as Montello Bridging Finance to provide short-term property loans following the retrenchment of the large UK banks from the market. In 2013, it launched its online platform and became LendInvest.
Since then, it has made efforts to grow its capital base to reduce the cost of its funding and move towards the mainstream mortgage market. In August 2017, it listed the first tranche of a £500 million retail bond programme on the London Stock Exchange. In September 2018, it completed a round of funding, raising £30.5 million from investors including Atomico, GP Bullhound and Tiger Management, bringing its fundraising total to more than £1 billion.
The firm confirmed in March that it was considering a stock market flotation. In a statement, subsidiary LendInvest Secured Income announced: “LendInvest Limited, the ultimate holding company of LendInvest Secured Income plc, has confirmed that, together with its major shareholders, it is considering a range of strategic options for the business, including a potential IPO.”
LendInvest entered the buy-to-let residential mortgage market in 2017, targeting loans at professional portfolio landlords. The programme was financed with a credit facility provided by Citi, which is understood to have been more than £200 million. LendInvest reported in its most recent financial results that it had originated nearly £130 million of BTL mortgage loans in the six months to 31 March 2019.
As part of its drive to capture a slice of the mainstream mortgage market, LendInvest in April sourced a £200 million facility from HSBC to launch its first homeowner loan product.