Pepper successfully completes PRS13 RMBS issue

Posted 03-10-2014

Pepper Australia Pty Limited (“Pepper”) and Joint Lead Managers, Commonwealth Bank of Australia (Arranger) and National Australia Bank, today confirmed that the Pepper Residential Securities Trust No. 13 (“PRS13”) AUD400 million non-conforming RMBS issue has priced.

Transaction details are as follows:

Class of notes Provisional Ratings S&P / Moody's AUD Issue Amount (Million) WAL (Years)¹ Issue Margin
A1 AAA(sf) / Aaa(sf) 280.0 2.2 30 Day BBSW +0.95%
A2 AAA(sf) / Aaa(sf) 47.6 2.2 30 Day BBSW +1.30%
B AA(sf) / NR 19.6 4.2 30 Day BBSW +1.75%
C A(sf) / NR 18.4 4.2 Undisclosed
D BBB(sf) / NR 13.6 4.2 Undisclosed
E BB(sf) / NR 8.8 4.2 Undisclosed
F B(sf) / NR 6.0 3.2 Undisclosed
G Not Rated 6.0 5.1 Undisclosed

¹ The estimated WAL for each Note Class is based on full amortisation with a CPR 25% p.a. the Stepdown Criteria being met from the earliest possible date and the Trust Manager Call Option being exercised at the earliest possible date.

All tranches were priced at par.

Settlement Date: Thursday, 9th October 2014

Clean up call: Any Payment Date occuring:

  • From November 2019 (ie. 5 years); or
  • When the aggregate Invested Amount of the Notes outstanding is less than 20% of the aggregate initial Invested Amount of the Notes.

Commonwealth Bank of Australia and National Australia Bank Limited were the Joint Lead Managers.

The transaction is Pepper’s second public RMBS issue for 2014.

“This is a significant transaction, not only for Pepper, but also the Australian Securitisation market. It’s pricing relative to prime issuance and the overwhelming investor interest reinforces the confidence the market has in Australian RMBS” said Pepper’s Co-Group Chief Executive Officer, Patrick Tuttle. “We are delighted with the strong support that we continue to receive from loyal repeat investors, with each of the tranches being oversubscribed and pricing inside the equivalent PRS 12 margins set in April 2014”, added Tuttle.

“The PRS13 issue was well supported by investors across the entire capital structure, with many of whom are repeat buyers. Our track record and commitment to always call our term deals at the first available date, continues to attract strong support” said Pepper Group Treasurer, Todd Lawler. “This is a strong endorsement of Pepper’s business model, the credit quality of the underlying loan collateral and our expertise as a specialist mortgage servicer” added Lawler.

“The success of this transaction for Pepper evidences significant RMBS margin compression throughout 2014 and the ongoing investor appetite for the product” said Andrew Cunningham, Associate Director, Debt Markets Securitisation, Commonwealth Bank of Australia.

“The pricing of Pepper’s transaction reflects continued appetite from the investor base (both onshore and offshore) for Australian non-conforming RMBS, an asset class which continues to perform well, with arrears and losses significantly lower than non- conforming RMBS in any other market – and given the significant structural credit enhancement, it offers strong relative value for investors” said Sarah Samson, Director, Debt Markets, National Australia Bank Limited”,.

Pepper is a diversified financial services business with specialist experience in lending, advisory and asset management across the residential, auto and equipment and commercial property sectors. It is a specialist servicer of prime and non-conforming residential mortgages and consumer loan and lease receivables. PRS13 is the fifteenth public issue of residential mortgage-backed securities backed by Pepper owned and serviced mortgages, increasing its total RMBS issuance to A$5.6 billion.

ENDS