Australia's Firstmac completed a A$1 billion ($610.8 million) residential mortgage-backed securities (RMBS) issue on Friday, becoming the country's first non-bank lender to tap investors since the coronavirus pandemic wreaked havoc in funding markets.
The issuance, which was upsized from A$880 million, was helped by a A$15 billion government stimulus for non-banks and smaller banks aimed at supplying low-cost loans to customers.
JPMorgan was the sole arranger of the issue. ANZ Banking Group <ANZ.AX>, JPMorgan, National Australia Bank <NAB.AX> and Westpac Banking Corp <WBC.AX> were the joint lead managers.
The Australian Office of Financial Management (AOFM), which manages the federal government's debt, invested in the RMBS, Firstmac Chief Financial Officer James Austin said in a statement.
"The participation of the AOFM has brought additional confidence to the investors in the transaction and has facilitated the successful pricing and upsizing of this trade," Austin added.
The proceeds of the issue will be used by Firstmac and its retail brand loans.com.au to write home loans.
Firstmac's issuance comes amid concerns of a slowdown in home sales in Australia and expectations of higher mortgage defaults after the country halted all housing auctions and inspections to contain the spread of the coronavirus.
Ratings agency S&P this week said it expects liquidity stress and delays in loan repayments to hit cash flows to Australia's RMBS transactions, despite recent support measures.
The non-bank sector heavily relies on mortgage securitisation to fund its operations, forcing lenders to revise pricing expectations or defer fund raising as global markets were whipsawed by the coronavirus pandemic and liquidity dried up.
Firstmac said investors in its RMBS transaction participated from Britain, Asia, together with domestic Australian domiciled institutions "despite the extremely difficult market conditions."
(Reporting by Swati Pandey; Editing by Shri Navaratnam and Stephen Coates)
