The Australian RMBS market continues to function smoothly for non-bank lenders, with Columbus Capital becoming the fifth such issuer to execute a deal since the asset class reopened on March 27.
Columbus sold a A$600m (US$414m) RMBS offering, Triton 2020-2, last Friday that was not directly supported by the Australian Office of Financial Management's A$15bn Structured Finance Support Fund scheme.
The AOFM did not buy any of the previous two RMBS offerings, the A$1.25bn La Trobe non-conforming RMBS on May 12 and Resimac's prime RMBS on May 27. However, both of these mortgage loan originators, unlike Columbus, have benefited from the AOFM’s secondary market RMBS purchases, which free up existing investors to buy new bonds on offer from the same issuer.
So far, the AOFM has bought A$292.55m from 46 RMBS tranches in the secondary market, ranging from Class A2 to Class E notes, issued by non-banks Liberty, Pepper, Resimac, RedZed, Firstmac, Think Tank, La Trobe and Mortgage House.
The AOFM previously supported Firstmac and Liberty by buying into their March 27 and May 8 RMBS offerings, which helped drive margins lower on some tranches.
The SFSF was formed on March 19 to purchase targeted RMBS and other ABS originated by smaller lenders in the primary market as well as provide warehouse financing. The SFSF subsequently invested A$20m in Columbus’s warehouse facilities on April 17.
Meanwhile the AOFM and Australian Securitisation Forum are still working to finalise arrangements for the creation of a Forbearance Special Purpose Vehicle to compensate investors for cashflows deferred by repayment holidays due to the coronavirus.
WIDER PRICING Non-bank RMBS have been helped by the absence of competing issuance from authorised deposit-taking institutions (mostly banks), which have far cheaper funding sources available to them.
“RMBS makes no sense whatsoever in a funding-only perspective for ADIs given that they can currently borrow at a fixed 0.25% for three years from the RBA’s Term Funding Facility,” said one DCM manager.
Despite explicit or implicit AOFM support and the lack of bank-originated supply, new issuers are having to pay significantly higher margins than before the coronavirus outbreak.
The Australian economy and mortgage market have held up relatively well in global terms, but mortgage payment problems are clearly mounting. Moody’s reported on June 2 that the 30 plus days delinquency rate for prime Australian RMBS increased to 1.79% in March 2020 from 1.55% in December 2019 and is likely to continue to rise as GDP contracts and unemployment increases.
“Government measures provide some relief but do not fully offset the impact,” the agency said.
The Columbus Capital Triton 2020-2 prime RMBS A$270m of Class A1-AU notes, with a 1.5-year weighted-average-life, were priced at one-month BBSW plus 140bp.
The A$240m of Class A1-3Y, A$42m of Class A2, S$16.8m of Class AB, A$12.6m of Class B, A$8.4m of Class C, A$4.2m of Class D, A$2.7m of Class E and A$1.8m of Class F notes, all with 2.7-year WALs, were priced 160bp, 190bp, 220bp, 260bp, 350bp, 425bp, 650bp and 800bp wide of one-month BBSW. The transaction was completed by A$1.5m of retained Class G notes.
For the A$1bn Columbus Capital Triton 2020-1 prime RMBS on February 28 spreads were significantly tighter, despite comparable tranches having much longer tenors.
The 2020-1 Class A1-AU notes with a 2.8-year WAL were priced at one-month BBSW plus 125bp, 15bp inside the new Class A1-AU notes, which have a 1.5-year WAL.
The 2020-1 Class A2, AB, B and C notes, all with 4.3-year WALs, were priced at 140bp, 160bp, 185bp and 245bp over one-month BBSW, or 30bp, 60bp, 75bp and 105bp tighter than the latest notes, which have 2.7-year WALs.
NAB was arranger and joint lead manager for Triton 2020-2 with Natixis, Standard Chartered Bank and Westpac.