LONDON, UK: LendInvest plc (AIM: LINV), UK’s leading platform for mortgages, today announces the sale of a portfolio of Buy-to-Let residential mortgages to Chetwood Financial Limited for a cash consideration of £243 million inclusive of the proceeds from cancelled interest rate derivatives.
Following completion of the Transaction, LendInvest will continue to manage and service the Portfolio on behalf of the Buyer.
This sale is another demonstration of LendInvest’s commitment to optimising its funds under management, while at the same time reducing the proportion of its platform assets under management on its balance sheet.
The Portfolio comprises mortgages that originated from 1 March 2022 to 30 November 2022. Within this timeframe, there was a substantial rise in overnight indexed swap rates due to increases made to the base rate, which rose from 0.5% to 3.0%.
As a result, the profitability of these mortgages was negatively affected. The proceeds from the Transaction will be used to repay the facilities that financed the assets, which allows that capital to be redeployed to originate new mortgages with stronger margins.
The book value of the Portfolio as at 26 May 2023 was c.£250 million. As such, a net pre-tax loss on the sale of the Portfolio and the cancellation of the related derivatives is estimated to be around £10.5 million (subject to audit) which will be recognised through the P&L in the year ended 31 March 2024.
This largely offsets the net pre-tax profit of £10.8 million generated from the sale of residual economic interest announced on 19 April 2023 leaving the P&L impact marginally positive.
Commenting on the Transaction, Rod Lockhart, CEO of LendInvest, said: “This transaction demonstrates our proactive approach to capital management and supports our longer term strategy to manage an increasing proportion of platform assets for third parties. It also initiates a new partnership, adding to a growing list of global financial institutions choosing to back our mortgage products. We believe the diversity, sophistication and continued commitment of our funding partners is a powerful demonstration of their trust in our capabilities.”
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