...Strengths Concerns and mitigating factors Paratus' lending policy is in line with market standards. However, Paratus does not permit top-slicing on BTL loans, whereas several of its peers do. We consider top-slicing to be an additional risk factor. Almost all of the loans (93.0%) bear a fixed rate of interest initially, on average for five years from origination, after which the interest rate becomes floating. Another 6.6% of the loans pay a discounted floating margin initially, before reverting to a higher margin. Higher reversion floating rates on the loans pose a prepayment risk for noteholders, which we incorporated in our cash flow analysis. The pool has a low current indexed loan-to-value (LTV) ratio of 71.5%, which is more likely to incur lower loss severities if the borrower defaults. The transaction contains some loans advanced to limited liability companies rather than directly to individuals. All these loans benefit from personal guarantees and a first-ranking charge on the security...
