According to an interim management statement, in October 2011, group subsidiary Paragon Mortgages completed its first securitisation since July 2007, a £163.8m transaction.
Paragon Mortgages placed £131.7m Class A Senior notes, rated AAA by Fitch and Aaa by Moody’s, with investors in what it called ‘a major step in the group’s funding programme.’
The group generated operating profit of £20.3m, against £18.1m for Q4 the previous year, with pre-tax profits of £20.8m for the period.
At 31 December 2011, arrears over three months on the buy-to-let portfolio, including acquired loans and receivership cases, were 64bp, compared to 83bp in 2010.
Paragon spent £98.9m on portfolio acquisitions over the period and £37.5m in the recent securitisation by Paragon Mortgages and had a free cash balance of £83.6m at 31 December 2011.
In October 2011, the Group’s investment division, Idem Capital bought a portfolio of unsecured consumer loans from The Royal Bank of Scotland for £43.2m, with more purchases expected. On 19 December, the arm bought a portfolio of credit card receivables from MBNA Europe Bank for £55.7m, bringing the year’s purchase total to £145.2m.
The group will continue with this strategy and managing director, John Heron said this is simply a secure way of funding mortgage lending.
“The benefit is when we sell a bond for the full 25-year term of the loan this offers a sophisticated and safer way to fund our lending. The FSA understands the value and the benefits of structured finance in the mix of mortgage funding. It also fully recognises that these funding structures are essential to the health of the mortgage and housing markets,” said Heron.
Heron added the group plans to exceed its 2011 lending figures in 2012.