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Columbus unearths new market with $250m non-resident bond deal

Article by: Sarah Thompson and Anthony Macdonald
Publication:The Australian Financial Review
Date: 01 September 2019

Non-bank lender Columbus Capital has broken new ground with a $250 million securitisation of mortgages issued solely to offshore buyers of Australian properties.

Columbus Capital and its banker syndicate - arranged by Credit Suisse and including MUFG, Natixis, Standard Chartered and Westpac - wrapped up the unique deal late on Friday, after spending about a fortnight in front of potential investors.

The deal, dubbed Vermillion, consisted of seven tranches, each made up of Australian mortgages held by non-resident investors and worth $250 million in total.

It is understood about 80 per cent of the exposures were Chinese investors in Australian apartments, while the bonds' buyers were mostly domestic and offshore asset managers.

The top tranche, the "Class A" notes rated AAA by S&P, priced at 150 basis points above BBSW, while similar deals for resident and non-resident mortgages have been pricing at about 115 to 120 basis points.

The fifth tranche down the list, dubbed "Class E" and rated BB, priced at 650 basis points over BBSW. It is not known what spreads were secured for the smaller Class F B-rated and the Class G unrated notes.

The deal was pitched as the first time globally that an issuer has offered an RMBS deal consisting solely of non-resident borrowers, and the first time a ratings house has been engaged for such a transaction.

Columbus Capital is one of the four big lenders to non-resident investors in Australia, taking on the likes of Blackstone's LaTrobe Financial, Melbourne-based BC Securities and Sydney's Brighten Home Loans.

Together, the four firms have targeted offshore borrowers for Australian property, and have stepped up their push in recent years as the big four banks re-focused their loanbooks.

It'll be interesting to see whether the likes of LaTrobe follow suit with similar RMBS deals.


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