Non-bank lender hits success with $500m RMBS issue

by AB23 Apr 2014
Non-bank lender Pepper confirmed yesterday that its $500 million non-conforming residential mortgage-backed security issue has priced.

The transaction is Pepper’s first public RMBS issue for 2014 and the largest of its kind since the GFC. The bond sale was managed two majors, CBA and NAB.

It is also Pepper’s third bond sale to the US market, and significantly, the first time Pepper has placed a non-conforming issue into the US market.

“The participation of US investors, along with a small number of European investors, in our non-conforming program helps to further diversify our offshore investor base, which is vital for a frequent RMBS issuer like Pepper,” said Pepper co-group CEO Patrick Tuttle. 

“Based on the strong response to our two previous prime mortgage backed issues, we were confident that the US investor base would also find this offering appealing.”

Fourteen domestic and seven foreign investors participated in the PRS12 issue, many of whom were repeat buyers, Pepper said.

“This transaction demonstrates that there is genuine investor demand for Australian non-conforming RMBS paper from quality issuers with strong servicing and asset performance history,” said Pepper group treasurer Todd Lawler. 

Rob Verlander, head of debt markets securitisation at CBA, said entering the US market with non-conforming assets for the first time set a benchmark for Pepper.

“New investor participation as well as significant demand from repeat buyers facilitated a tightening in price across all tranches and an increase in volume compared to their two 2013 non-conforming RMBS trades.”

NAB debt markets director Sarah Samson said there was a “healthy level of oversubscription” across all of the AUD and USD tranches.

The deal is the third non-bank issue of RMBS this month after deals from Liberty Financial and AFG each raised $300 million of RMBS backed by prime mortgages.

RMBS issuance is at its highest level since the financial crisis with $30 billion raised in 2013. So far this year, around $6 billion has been issued, mostly for prime mortgages.

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