Northern Rock PLC, the nationalized U.K. lender, said Thursday that its massive Granite securitization vehicle had hit a key trigger that would cause it to unwind, meaning some bondholders may have to wait many years longer than they expected to be repaid.

Granite, a so-called master trust that was set up to fund mortgage lending by issuing mortgage-backed securities, hit the trigger "due to the current seller share being less than the minimum seller share on two successive distribution dates," Northern Rock said.

The seller share in a master trust is the chunk of mortgage collateral that is owned by the originator of the loans and acts as a cushion to protect bondholders.

Analysts said that because the share had dropped below a certain percentage of the trust for two consecutive months, the master trust would be unwound, with bondholders being paid out in order of seniority and maturity.

Holders of junior bonds could end up waiting many years before getting their money back, the analysts said.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.