Paragon agrees £200m mortgage facility with Lloyds
SOLIHULL-based mortgage and credit group Paragon has agreed a £200m revolving loan facility with Lloyds Bank to help fund new mortgages.
Paragon said the so-called mortgage warehouse facility would be used in a similar way to the existing £200m warehouse facility provided by Macquarie Bank, to fund loan originations by the group’s buy-to-let mortgage business.
A warehouse facility is a line of credit used by mortgage bankers. It is a short-term revolving credit facility extended by a bank or other financial institution to a mortgage lender.
The facility, rated by Fitch Ratings, will be available to Paragon Fifth Funding Ltd, an independent special purpose vehicle company, and interest will be charged on the amount drawn at three month LIBOR plus 2.75%.
Paragon said that as was the case with the existing Macquarie facility, the group’s intention is to use the facility to originate mortgage loans prior to arranging term funding in the mortgage backed securitisation markets, where the group has considerable experience stretching back for 25 years.
The Lloyds Bank facility is structured with a three-year term to permit drawings and re-drawings in its first 18 months, or up to 24 months, subject to a capital markets refinancing of part of the facility in the first12 months.
Paragon successfully concluded a capital markets securitisation of buy-to-let mortgages in November 2011 through its subsidiary company, Paragon Mortgages.
Commenting on the new facility Nigel Terrington, chief executive, said: “We are delighted to announce the new warehouse facility with Lloyds, an organisation with an outstanding track record in the mortgage backed securities markets. This additional facility will be used to fund further buy-to-let mortgage lending in a market that has continued to gain momentum, and we look forward to growing this area of our business.”
The group said negotiations were progressing well for an extension to its existing warehouse facility with Macquarie Bank, which finishes at the end of the year.
Paragon will be announcing its full year results for the 12 months to September 30, 2012 on November 20.
