Pepper's GE Capital pay-off: Non-bank announces $500m RMBS issue

by Mackenzie McCarty12 Aug 2013

Pepper’s acquisition of GE Capital’s Australian mortgage portfolio in 2011 appears to have paid off, with the non-bank lender announcing its second public securitisation issue utilising prime loans originated by the portfolio.

The $500m transaction, Pepper Prime 2013-1, was supported by a total of 15 accounts, including 10 domestic investors and five offshore investors, according to Pepper, many of whom have previously participated in the lender’s non-conforming issues.

“We anticipated doing further issues backed by GE-originated collateral over time, tapping into US, European and Australian markets as conditions permit,” says Pepper’s group treasurer, Todd Lawler.

Lawler says Pepper has been ‘delighted’ with investor response to the transaction.

“It strongly endorses our business model and reputation as a high quality issuer and servicer in this market,” he adds.

“The Pepper Prime 2013-1 transaction demonstrates that there is genuine investor demand for Australian RMBS paper from quality non-bank issuers with strong servicing and asset performance history,” says Pepper CEO, Patrick Tuttle. “This is our fifth RMBS issue since late 2010 and our second backed by prime, mortgage insured collateral.”

In a statement published in Banking Day, Lawler further notes that, two years after the acquisition of GE Capital’s portfolio, around half of the loans are still outstanding and that Pepper has tightened the arrears rate down to 4%.

"We collect like a non-conforming lender. Large institutions have a different focus…The book is continuing to improve, which is a great result considering it is a run-off book."