OneSavings Bank plc
("OSB" or the "Company")
Disposal of economic interest in Rochester Financing No. 1 plc (the "Transaction")
OneSavings Bank plc today announces that it is selling its entire economic interest in the Rochester Financing No.1 plc securitisation ("Rochester 1"). Morgan Stanley is to purchase the C, D and E Notes and will also launch a formal auction process for the Class F Notes and Residual Certificates issued by Rochester 1. This will result in a consideration of not less than £95 million in cash payable at completion to OSB. The entirety of the Class F Notes and Residual Certificates benefits from a backstop provided by Morgan Stanley with the consideration being subject to potential upward adjustment.
The Transaction is expected to generate an exceptional pre-tax gain of at least £25 million. The Transaction would have resulted in a reduction of c.£256 million of gross assets1 and c.£81 million of Risk Weighted Assets currently attributable to the securitised mortgages, and increased the Company's CET1 ratio by not less than 1.2 percentage points, if it had occurred as at 31 December 2015. In 2015, the gross interest income attributable to these assets was £18 million.
The gain on sale will be used in part to support additional net loan book growth in 2016 which is now expected to be marginally ahead of previous guidance of 20%. There is no change to any other guidance for 2016 as a result of the Transaction.
Commenting on the Transaction, Andy Golding, CEO of OneSavings Bank, said:
"This Transaction provides strong evidence of our ability to acquire and manage high quality loan portfolios and deploy capital to generate strong shareholder returns. We have a disciplined investment and disposal process and we will continue to evaluate opportunities as they arise to supplement the ongoing organic growth opportunities we have in front of us."
Background on Rochester
Rochester 1 was issued on 16 October 2013 and securitised approximately £376m of acquired mortgages sold to it by OSB. At the time of issuance, Rochester 1 sold the three most senior classes of notes (A1, A2 and B) to third-party investors and OSB purchased the four most junior classes of notes (C, D, E and F) as well as the Residual Certificates. The Transaction will result in the de-recognition of the securitised mortgages and, as a liability, the senior most notes (A1, A2 and B) from the OSB Group balance sheet.
The Transaction is expected to close in June and is subject to standard terms and conditions.
1Includes £29m of non-mortgage assets in Rochester 1.
OneSavings Bank plc
Alastair Pate t: 01634 838 973
Robin Wrench / Simone Selzer t: 020 7404 5959
About OneSavings Bank plc
OneSavings Bank plc ('OSB') began trading as a bank on 1 February 2011 and was admitted to the main market of the London Stock Exchange in June 2014 (OSB.L). OSB joined the FTSE 250 index in June 2015.
OSB is a specialist lending and retail savings group authorised by the Prudential Regulation Authority, part of the Bank of England, and regulated by the Financial Conduct Authority and Prudential Regulation Authority.
OSB primarily targets underserved market sub-sectors that offer high growth potential and attractive risk-adjusted returns in which it can take a leading position and where it has established expertise, platforms and capabilities. These include private rented sector Buy-to-Let, commercial and semi-commercial mortgages, residential development finance, bespoke and specialist residential lending and secured funding lines. OSB originates organically through specialist brokers and independent financial advisers. It is differentiated through its use of high skilled, bespoke underwriting and efficient operating model.
OSB is predominantly funded by retail savings originated through the long established Kent Reliance name, which includes online and postal channels, as well as a network of branches in the South East of England. Diversification of funding is currently provided by securitisation and participation in the Funding for Lending Scheme.