Cynergy Bank has completed its debut securitisation transaction, securing capital relief as it continues to expand its lending to professional landlords.
The bank has successfully closed a cash derecognition residential mortgage-backed securities transaction, Lovelace CBP 01, backed by buy-to-let mortgages secured against a mix of residential and commercial property.
The deal allows Cynergy Bank to achieve capital relief while continuing to support its core customer base of professional landlords. It also introduces two structural features that differentiate it from previous transactions in the market.
The first is a mechanism designed to ensure that lending to individual customer groups is either fully included in, or fully excluded from, the securitisation pool, avoiding situations where a customer’s borrowing straddles both the securitised and retained balance sheets.
The second is a two-year replenishment period, during which the bank can add further lending to customer groups already included in the pool.
Both elements reflect Cynergy Bank’s mortgage model, which focuses on predominantly short-term amortising loans, typically with terms of two to five years, secured across a landlord’s wider property portfolio.
Unlike some lenders, Cynergy Bank does not automatically revert customers to a standard variable rate at the end of the loan term. Instead, borrowers are offered options including product switches or refinancing, a feature that influenced the structure of the securitisation.
Together, these features enabled the bank to derecognise loans for capital purposes while continuing to support existing customers as their portfolios expand.
Lloyds Bank Corporate Markets acted as arranger on the transaction.
Nicholas Fuller, director of group treasury at Cynergy Bank, said: “This transaction demonstrates Cynergy Bank’s ability to innovate in securitisation while keeping customer needs at the heart of our approach.
“The replenishment period gives us the flexibility to support existing borrowers with further advances and product switches, while delivering capital efficiency and balance sheet optimisation.
“It marks an important step in aligning our funding strategy with the way our customers manage and grow their property portfolios.”
Lovelace CBP 01 is intended to be the first transaction in a regular issuance programme. Future special purpose vehicles will be named after UK innovators, with this inaugural deal taking its name from Ada Lovelace, a pioneer of mathematics and computing.
The programme is expected to support Cynergy Bank’s continued growth, with its loan book having expanded from around £1.5bn in 2018 to approximately £4.5bn today.
