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Leeds’ £250m bond to fund mortgages

Leeds Building Society has launched a £250m publicly placed covered bond that will be used to help fund mortgage lending.

The bond is backed by prime residential mortgages with an average loan to value of around 70 per cent.

The coupon for the bond has been set at three-month Libor plus 150 basis points and the debt will mature in three years.

Both Moody’s and Fitch have given the bond a AAA rating. The lead managers are BNP Paribas and Royal Bank of Scotland.

Leeds Building Society issued £250m publicly placed covered bonds in November 2010 and June 2011.

Covered bonds are securities backed by mortgages although the key difference between these bonds and residential mortgage-backed securities is that the originator keeps the loans on their balance sheet. Leeds advanced £1.2bn in residential mortgage lending last year compared with £984m in 2010.

London & Country associate director of communications David Hollingworth says: “It is good news to see a lender other than the big players being able to get access to the wholesale markets. Having more diverse funding will allow it to show more flexibility, which is good.”

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