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Pepper, Mortgage House RMBS issuances get rated

Standard & Poor’s has assigned definitive ratings to the latest residential mortgage-backed securities issuances of Mortgage House and Pepper Group.

Pepper Group’s latest near-prime and non-conforming residential mortgage-backed securities (RMBS) transaction (PRS 24), priced at $750 million, has been rated by Standard & Poor’s (S&P).

The ratings agency provided its highest provisional rating of AAA to three tranches of A1 securities, one of which is USD-denominated and another EUR-denominated, as well as A2 securities, valued collectively at around $637 million.

Commenting on the portion of the transaction that was in green Euro bond format, Paul Byrne, Pepper Group’s treasurer, recently said: “This tranche continues to attract growing investor attention, with the book being two times covered at the top.

“This was the third transaction where we had the opportunity to demonstrate our green credentials and to demonstrate industry leadership in relation to energy-efficient housing and the need to reduce the carbon footprint of our housing stock.”


Mr Byrne continued: “We remain committed to continuing to meet investor demand for green bonds and will bring a further two green bond tranches to the market over the course of 2019.”

Classes B and C, valued at $75.5 million, were assigned AA and A ratings, respectively; while classes D, E and F were provided ratings of BBB, BB and B, respectively. Class G securities were not rated by S&P.

Moody’s Investors Service assigned similar ratings to PRS 24.

In terms of risk, Moody’s noted that the portfolio has a “relatively high” weighted-average scheduled loan-to-value (LTV) ratio of 71.9 per cent, with 29.4 per cent of the loans with a scheduled LTV ratio higher than 80 per cent.

Further, around 20 per cent of the $750 million portfolio comprises loans extended to borrowers with previous credit impairment (default, judgement or bankruptcy), while 39.8 per cent of the portfolio comprises loans underwritten on an alternative documentation basis.


Moody’s additionally noted that the portfolio has a “low” weighted-average seasoning of 3.9 months, with 85.2 per cent of loans originated in the last six months.

In addition to rating Pepper’s third RMBS issue of 2019, S&P assigned definitive ratings to Mortgage House’s $300 million prime RMBS issue, which is its first of 2019.

Classes A-1, A-2 and AB securities, valued at $281.7 million, received AAA ratings; while classes B and C securities, valued at $11.5 million, were assigned ratings of AA and A, respectively.

Securities in classes D, E and F, valued at $5.3 million, was rated BBB, BB and B, respectively, while G class remained unrated.

[Related: RMBS delinquencies projected to rise]

Pepper, Mortgage House RMBS issuances get rated


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