Dentons cross-border team advised Coventry Building Society on one of very few prime RMBS issues post-pandemic, and the first new UK Master Trust to come to market in more than a decade.
This was a master issuer structure re-invented for the current market, which built on and enhanced many of the features of the older generation of pre-crisis master trusts.
The versatility of the structure means a deal can be brought to market in a matter of weeks rather than months, which is beneficial for issuers in rapidly changing market conditions.
The innovatively structured master issuer programme had a debut trade in July 2020 with £350m A1 notes and £500m Class A2 notes. The notes were 3.6 times oversubscribed by the time they were priced via arrangers and leads HSBC and Lloyds.
The team was led by London securitisation partner Peter Voisey, with securitisation associate Kamraan Akhtar. Voisey co-heads the firm’s securitisation and structured finance practice.
He advises originators, arrangers and other market participants, both within the UK and internationally, on a broad range of public and private securitisation and warehousing transactions, covering many asset classes, including residential mortgages, consumer loans, auto loans, commercial mortgages, NPLs, trade receivables, corporate and leverage loans, equity release and home reversion plans, as well as on the acquisition, financing and disposal of portfolios of assets, both performing and non-performing, in the whole loan market.
Akhtar joined Dentons in 2017, having trained at Clifford Chance and moved to the firm on qualification. He has worked on a range of securitisation deals including public and private securitisations, portfolio disposals, and CLOs, mainly alongside Voisey and other partners; Martin Sharkey; Ed Hickman; Kitty Lloyd; Luke Whitmore; David Cohen; and Felicity Ewing.
Coventry Building Society is a relatively new client of the firm. Dentons started acting for the bank in 2018/19 on a debt capital markets deal in relation to their EMTN Programme, which involved introducing new Senior Non-Preferred Note provisions to take advantage of new legislation enacted in December 2018. Following this deal, the firm was instructed on its first securitisation deal in mid-2019. Dentons advised on its €7bn covered bond programme update and issue of €500m Series 10 fixed rate covered bonds under the programme.
Akhtar said this deal will stand out to him for its complexity, and the fact that the structure is a master issuer structure and was the first to be established after the 2008 financial crisis. “The deal reinforced the importance of having a sufficient number of associates and partners (securitisation, tax, US, regulatory etc.) with the right skills to perform the various tasks required throughout the deal,” he explains.
“The capital structure was complex and so were the cash flows. The asset-level provisions were driven by a mixture of rating agency/investor expectations as to the types of assets that could be included, and client needs due to the types of loans they make.”
Dentons has also advised on the update of Coventry Building Society’s £5bn EMTN programme and issue of £400m 1.5 per cent Senior Preferred Notes due 2023. The Economic Master Issuer PLC matter is the fourth matter it has advised Coventry Building Society on, and its standing in the securitisation market and relationship with Phead of capital markets Philip Hemsley, meant it was in pole position to advise them on the establishment of this programme.
The structure represented a significant modernisation and enhancement of the older master trust programmes. The programme uses only one SPV, as opposed to the usual three SPVs seen in master trusts, to acquire the loans and issue the notes. This reduces documentation and allows some flexibility when adjusting to regulatory or tax changes. It also enables Coventry Building Society to manage its ratings agency and counterparty exposures more dynamically than a traditional structure might.
The programme is extremely versatile in its funding options, allowing different profiles of note to be issued, mirroring the versatility seen in some covered bond programmes. The structure creates the flexibility to switch between formats, such as bullet, controlled amortisation and pass through notes. Notes can be STS eligible and can be issued to US and European institutional investors.
The versatility of the seller’s note is retained by Coventry, allowing loans to be sold to the trust separate from public issues, providing greater speed to bring a deal to market as a new issue does not need to be tied to a top up of the collateral pool.
Since the deal, there has been interest from other financial institutions in using a similar structure, with Barclays announcing a structured new mortgage master issuer vehicle similar to the Coventry Building Society’s Economic Master Issuer deal, according to Global Capital.
Akhtar says the deal has added to his “arsenal of experience”. He has gone on to advise on a range of work, acting for originators, sponsors, issuers and asset managers on transactions which have included private portfolio sales, redemptions, amendments to existing public securitisations, forward-flow structures, warehouses and public securitisations.
He highlights both pros and cons to working on such a major finance deal throughout a global pandemic. “Limitations include longer hours and making it harder to switch off: benefits include less distractions from an office environment and printing less paper. I haven’t found it hard to communicate with colleagues while working from home and enjoy being able to focus on tasks without being distracted,” he says.
“Working remotely highlighted the importance of co-ordinating diaries with other members of the team. Fundamentally, I haven’t found remote working to be that different from working with people in the office as we are still as busy as ever and still have to find convenient times to speak to people, just as we would in the office.”
About Kamraan Akhtar
2017-present: Associate, Dentons
2015-17: Trainee solicitor, Clifford Chance
Who’s Who: the Dentons team
Lead partner: Peter Voisey
Supporting: Associates Kamraan Akhtar, Jimmy Yang and Jakub Telicka, derivatives partner Matthew Sapte and associate Annreika Ray, tax partner Alex Tostevin and senior associate Kirsten Hunt (all London), banking and finance consultant Morag Campbell (Glasgow), and capital markets partner Steve Kudenholdt and senior associate Cam Morris (New York).