UK buy-to-let mortgage securitisation activity continues with Atlas Funding 2026-1 PLC completing the rating process for a new residential mortgage-backed securities issuance. The deal is backed by first-lien loans from specialist lender Lendco Limited and marks the company’s seventh securitisation since 2021.
Highlights
- DBRS Ratings Limited finalised credit ratings on Atlas Funding 2026-1 PLC’s RMBS, assigning AAA (sf) to Class A and BB (high) (sf) to Class X2.
- The transaction features first-lien UK buy-to-let mortgage loans from Lendco Limited, with liquidity facilities and reserve funds supporting Class A and B interest shortfalls.
- The deal uses interest rate swaps to manage fixed-to-floating rate mismatches and switches from pro rata to sequential amortisation upon portfolio performance or seasoning trigger events.
Ratings structure and transaction features
As reported by Morningstar DBRS, DBRS Ratings Limited has finalised provisional credit ratings on Atlas Funding 2026-1 PLC’s residential mortgage-backed notes, assigning AAA (sf) to Class A, AA (sf) to Class B, A (high) (sf) to Class C, A (low) (sf) to Class D, BBB (high) (sf) to Class E and Class X1, and BB (high) (sf) to Class X2.
The transaction issues RMBS backed by first-lien buy-to-let mortgage loans originated by Lendco Limited in the UK. The issuer is a bankruptcy-remote special-purpose vehicle incorporated in the UK, while the loan book is tied to Lendco’s specialist property finance business serving customers in England and Wales since 2018.
Liquidity support comes from a facility available from closing and a liquidity reserve fund financed through excess spread. The facility covers senior costs and expenses, senior swap payments and interest shortfalls on the Class A notes, while the reserve fund also extends to Class B note interest shortfalls.
The structure also allows principal borrowing under certain conditions to meet senior costs and expenses and interest shortfalls on the most senior outstanding class of notes. Interest shortfalls on Class B to Class E notes are deferred, unless they are the most senior notes outstanding, and are not treated as an event of default until final maturity or earlier full redemption.
Market context and amortisation mechanics
Lendco focuses its buy-to-let business on professional portfolio landlords, including real estate companies and SPVs, sourcing business through the broker marketplace. Atlas Funding 2026-1 follows six previous securitisations, from the inaugural Atlas Funding 2021-1 in January 2021 to Atlas Funding 2025-2 in November 2025.
The deal includes two fixed-to-floating interest rate swaps because a large share of the underlying loans carries fixed rates before reverting to floating rates, while the liabilities pay a coupon linked to Sonia. This structure is designed to manage the mismatch between asset and liability interest profiles.
On amortisation, the notes initially operate on a pro rata basis before switching to sequential amortisation if a Sequential Payment Trigger Event occurs. Those triggers are linked to portfolio performance and seasoning thresholds, and once breached, the structure cannot return to pro rata amortisation.
In our earlier report on Morningstar DBRS’s final ratings for Regents Capital Equipment Receivables 2026-1, we outlined how the equipment lease and loan securitization was structured across four note classes with support from features such as overcollateralization targets and a reserve account. We also noted the role of excess spread from the pool’s yield/discount-rate setup, the limited exposure to unguaranteed booked residuals, and Regents’ origination profile and collateral mix that link performance to demand in logistics and industrial sectors.
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