Expert in Estate UK-3 securitization finds loss allocation to credit linked notes in full amount of GBP 113.8 million permissible


No negative impact on Deutsche Pfandbriefbank results

The trustee appointed expert for the securitization transaction Estate UK-3 (UK-3), which hedges the credit risk exposure of a real estate loan portfolio via credit linked notes, today informed on its findings. It found the allocation of the full amount of a credit loss of GBP 113.8 million permissible. The loss allocation leads to a corresponding reduction of the repayments under the credit linked notes. The expert thereby fully affirmed the position of Deutsche Pfandbriefbank AG (pbb), the issuer of UK-3.

pbb will allocate the loss to the credit linked notes at the earliest possible date, which is 20 September 2019. The loss allocation will lead to a full write-down of the credit linked notes of classes A2, B, C, D and E and will reduce the nominal amount of class A1+ from GBP 400,000 by about 0.1 %.

With the loss being allocated to the credit linked notes, there will be no negative impact on pbb’s results. Due to the sound business performance in the first half of 2019, pbb now envisages a pre-tax profit for the financial year 2019 (IFRS, group) at the upper end of the communicated guidance of EUR 170-190 million or slightly above.

A predecessor institution of pbb had entered into UK-3 to hedge the credit risk exposure of a real estate loan portfolio via credit linked notes in 2007. The real estate loan portfolio subsequently suffered a loan default. pbb envisaged allocating a loss of GBP 113.8 million resulting from the default to the credit linked notes. Deloitte GmbH Wirtschaftsprüfungsgesellschaft, the trustee of UK-3, expressed doubts with respect to the permissibility of the loss allocation (please refer to pbb’s ad-hoc announcements dated 18 January 2016 and 13 December 2016). In June 2017, the trustee therefore appointed an independent expert to determine, whether the conditions for a loss allocation were met.

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