Before skiting to Australia’s biggest selling newspaper that you’re about to sell $500 million in mortgage-backed securities – labelled a “lifeline” by the Herald Sun yesterday morning – it’d be a good idea to have the investors committed.
Rams Home Loans Group, or their agents, did skite about it. But they didn’t have the funding locked down.
Rams appears to expect to manage to sell only half that and at an interest spread over the swap rate of between 50 and 60 basis points (the more precise though unconfirmed price talk is at a spread of 52 points). The pricing is quite a bit higher than the 40 basis points achieved by Macquarie Bank in connection with its Puma program last week. The low end of this range may be closer to Rams’ expectations though
There’s talk that one cornerstone investor in the Rams bonds who was expected to participate on Tuesday changed their mind. At least one other investor is taking a significant chunk of the securities.
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A formal announcement to the stock exchange employed guarded language: that it was “investigating prospects”, “not yet priced” and there was “no certainty that it will proceed”.
RBS and nabCapital are marketing the bonds for Rams.
Low doc loans comprised 18 per cent of the Rams portfolio. Rams managed to find loans with an average seasoning of 29 months. The portfolio has an average loan to valuation ratio of 66 per cent.
Two thirds of the loan are insured by PMI and Genworth, including a few insured by the Commonwealth of Australia (which were new business to Rams a decade ago). The balance of the pool are insured through Rams’ captive insurer based in Bermuda.
Rams, moreover, is beginning to stand out in the mortgage market – at least among those dependent on securitisation and bank warehouse lines to operate – since the company is yet to raise any of its interest rates (see next article).
Liberty Financial, meanwhile, is marketing $235 million in asset-backed bonds comprising loans under the funder’s small business program and collateralised by commercial property loans.
According to the pre-sale report published by Moody’s Investors Service the Liberty structure, which includes four tranches, required subordination of 19 per cent in order to get a Aaa rating on the senior tranche.