Two Australian non-bank lenders have successfully completed residential mortgage-backed securities issues amid a backdrop of pressure on Australian securitisation markets due to selling-off from UK interests.
Brisbane-headquartered FirstMac has successfully priced a $1.76 billion residential mortgage-backed securities issue, the largest non-bank issue of the year. The deal was split into eight tranches.
FirstMac says that the issue dispels fears about weaknesses in the market this year.
Chief Financial Officer James Austin said the success of the issue proved that the British pension funds’ widely-reported sell-off of Australian RMBS was due to the strength of our market.
“The market is certainly volatile due to the RBA increasing interest rates but our transaction demonstrates that it is still operating,” Mr Austin said.
“It shows that UK pension funds are selling here because our market is one of the most liquid markets in the world so they were able to raise cash here more easily than in most other countries”.
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Mr Austin said that the issue price of 1.53% over the Bank Bill Swap Rate was higher than earlier RMBS issues, but still competitive.
“Firstmac has now funded $5 billion in 2022 so we’re very well placed for the year ahead,” Mr Austin said.
“This means we’ll continue to have a forceful presence in the lending market, offering a real alternative to the big banks”.
Fellow non-bank lender Pepper Money last week increased its $500 million sale of bonds backed by non-conforming mortgages to $750 million according to the Australian Financial Review.
The AFR reported Pepper paid investors of the $225 million tranche of short-dated AAA notes a rate of 1.15 per cent over the bank bill rate. For the $337.5 million longer dated AAA notes, it paid 1.75 per cent over the bank bill rate.
The junior tranches paid margins of between 3.1 percentage points and 7.5 percentage points over the bank rate.
British investors had sold off Australian mortgage-backed securities to raise cash through auctions in a process called bids wanted in competition auctions (BWIC). Turmoil had been occurring in the UK’s pension fund industry against a backdrop of tax cuts and a recent surge in gilt yields.
