Virgin Money has begun preparations to enter the covered bond market in a bid to diversify its wholesale funding, and last week the bank incorporated Eagle Place Covered Bonds LLP as well as two other entities typically used in UK programmes.

Eagle Place Covered Bonds LLP, Eagle Place Covered Bonds Finance Ltd and Eagle Place Covered Bonds (Holdings) Ltd were incorporated on Wednesday of last week (27 July). The companies take their name from the address of a flagship Virgin Money office in London at 1 Eagle Place.

A spokesperson for Virgin Money confirmed that the move is part of the bank’s preparations. Virgin Money said in its 2015 annual report that it plans to “further improve wholesale [funding] diversification by issuing covered bonds in 2016” – the spokesperson said that no further details regarding timing are available.

Mortgages are Virgin Money’s core business, comprising 93% of its lending as of 30 June, with balances totalling £27.7bn (Eu33bn). Its gross mortgage lending in the first half of the year was 19% higher than a year previously, while it previously grew its book through the acquisition of mortgages from Northern Rock Asset Management/NRAM, after having earlier acquired parts of the failed UK lender.

Northern Rock-originated mortgages have been included in Virgin Money’s Gosforth Funding RMBS issuance alongside own-originated mortgages. Its most recent RMBS was Gosforth Funding 2016-2 in May.

Virgin Money’s move into covered bonds comes after TSB in May incorporated covered bond companies as part of its preparations to enter the market.

Photo: Virgin Money