Disposal of economic interest in Charter Mortgage Funding 2017-1 plc
16 January 2018
THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN IS RESTRICTED AND NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES OF AMERICA, AUSTRALIA, CANADA, JAPAN OR SOUTH AFRICA OR ANY OTHER JURISDICTION IN WHICH RELEASE, PUBLICATION OR DISTRIBUTION WOULD BE UNLAWFUL.
16 January 2018
For immediate release
Charter Court Financial Services Group plc (“Charter Court” or the “Group”) today announces that it has agreed to sell its entire economic interest in the Charter Mortgage Funding 2017-1 plc securitisation ("CMF 2017-1") to Merrill Lynch International (“BofAML”) for cash consideration of £26.5 million, payable on completion. The Transaction, which is expected to complete today, will involve the sale of the Class Z and subordinated notes and the residual certificates (“RC1s and RC2s” and, together with the Class Z and subordinated notes, the “Bonds”) to the securitisation. BofAML managed the sale process and purchased the Bonds for onward sale.
The Transaction will generate a pre-tax gain of £15.0 million (which will be attributed to the 2018 financial year). It will also result in a reduction in the gross assets of the Group of c.£293 million1 and a reduction in risk weighted assets currently attributable to the securitised mortgages of c.£97 million. The associated increase in common equity tier 1 capital ratio through the reduction in risk weighted assets and the one-off gain (once verified) will be reinvested to support new loan originations in Charter Court’s specialist lending segments and ongoing business activities. During the period between 27 July 2017 (the date that CMF 2017-1 was issued) and 31 December 2017, the assets being disposed of contributed £4.5 million in profit before tax based on un-audited figures.
Charter Court is also pleased to report that as at 31 December 2017, the Group’s loan book stood at £5.4 billion with new loan originations in the year amounting to £2.7 billion based on unaudited figures.
Commenting on the Transaction, Ian Lonergan, CEO of Charter Court, said:
“This has been an excellent transaction for Charter Court which demonstrates the investor confidence in the quality of our underwriting processes, underpinned by our track record of growing our loan book without sacrificing asset quality. I am also pleased with the delivery of strong net loan book growth and originations in 2017 as we continue our journey post-IPO. We look forward to presenting the full year results and broader business performance in March”.
Sebastien Maloney, CFO of Charter Court, added:
“This transaction further demonstrates our proactive approach to asset-liability and capital management together with our ability to execute capital markets transactions. The Group also recently closed a funding line with an affiliate of BofAML, which will further increase funding diversity through 2018 and beyond. I would also like to take this opportunity to note the recent changes to the standardised approach to credit risk introduced by Basel III regulations and affirm that we expect the impact of these to be broadly neutral for Charter Court.”
Background on CMF 2017-1
CMF 2017-1 was issued on 27 July 2017 and securitised approximately £297m of prime residential mortgages originated by Charter Court Financial Services Limited. At the time of issuance, CMF 2017-1 sold all of the rated notes (classes A, B, C and D) in the securitisation to third-party investors and Charter Mortgages Limited, a Charter Court group company, purchased the Bonds. The Transaction will result in the de-recognition of the securitised mortgages and, as a liability, the senior most notes (classes A, B, C and D) from the Group balance sheet.
The Transaction will settle on Thursday 18 January 2018.
A copy of this announcement will be available on Charter Court's website at: www.chartercourtfs.co.uk
1 Includes £15 million of non-mortgage assets in CMF 2017-1.
Charter Court Financial Services Group plc - Sebastien Maloney - 01902 625929
Citigate Dewe Rogerson - Andrew Hey, Caroline Merell, Jos Bieneman - 020 7638 9571
This announcement contains statements which are, or may be deemed to be, "forward-looking statements" which are prospective in nature. All statements other than statements of historical fact are forward-looking statements. They are based on current expectations and projections about future events, and are therefore subject to risks and uncertainties which could cause actual results to differ materially from the future results expressed or implied by the forward-looking statements. Often, but not always, forward-looking statements can be identified by the use of forward-looking words such as "plans", "expects", "is expected", "is subject to", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates", "believes", "targets", "aims", "projects" or words or terms of similar substance or the negative thereof, are forward-looking statements, as well as variations of such words and phrases or statements that certain actions, events or results "may", "could", "should", "would", "might" or "will" be taken, occur or be achieved. Such statements are qualified in their entirety by the inherent risks and uncertainties surrounding future expectations. Forward-looking statements include statements relating to (a) future capital expenditures, expenses, revenues, earnings, economic performance, indebtedness, financial condition, dividend policy, losses and future prospects, (b) business and management strategies and the expansion and growth of Charter Court’s operations, and (c) the effects of global economic conditions on Charter Court’s business.
Such forward-looking statements involve known and unknown risks and uncertainties that could significantly affect expected results and are based on certain key assumptions. Many factors may cause actual results, performance or achievements of Charter Court to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Important factors that could cause actual results, performance or achievements of Charter Court to differ materially from the expectations of Charter Court, include, among other things, general business and economic conditions globally, industry trends, competition, changes in government and other regulation and policy, including in relation to the environment, health and safety and taxation, labour relations and work stoppages, interest rates and currency fluctuations, changes in its business strategy, political and economic uncertainty and other factors as may be identified in relation to the disposal. Such forward-looking statements should therefore be construed in light of such factors. Neither Charter Court nor any of its directors, officers or advisers provides any representation, assurance or guarantee that the occurrence of the events expressed or implied in any forward-looking statements in this announcement will actually occur. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Other than in accordance with its legal or regulatory obligations (including under the UK Listing Rules and the Disclosure and Transparency Rules), Charter Court is not under any obligation and it expressly disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.