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La Trobe Financial prices $500m RMBS

The non-bank lender has completed its second RMBS transaction for 2020, with the underlying mortgage pool differing from the usual issuance.

La Trobe Financial has announced that it has completed a $500-million residential mortgage-backed security issuance, which it said would supplement its funding program.

This marks the 11th issuance for the lender since 2014 and its second transaction for 2020.

The lender was able to complete the specialist transaction (2020-S1) with repeat support from domestic and global investment houses, which included a new global investor.

All notes were oversubscribed, with an extension to the call option to five years, up from four years, to provide a longer funding term, according to the lender.

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It added that the underlying mortgage pool differed from the typical programmatic issuance from the lender, with a more specialist breakdown of the core mortgage assets.

It included a 90 per cent composition of investment loans, of which 35 per cent was super-prime self-managed superannuation fund (SMSF) loans.

It was able to complete the issuance without direct support from the Australian Office of Financial Management (AOFM), under which the Structured Financial Support Fund (SFSF) was announced in March as a $15-billion fund established to support non-banks’ fund raising.

Speaking of the support from the AOFM through the SFSF, La Trobe Financial president and CEO Greg O’Neill said: “RMBS is one of our important funding channels to the business, and the ongoing support of the AOFM through the SFSF of non-bank capital markets issuance should be commended, particularly during the most challenging period of April and May.”

Commenting on the RMBS issuance, La Trobe Financial chief financial officer Martin Barry said he was pleased to complete the transaction during a period of economic uncertainty amid the coronavirus pandemic.

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“This $500-million issuance has expanded our already strong RMBS funding channel, with a new large global investor onboarding and complementing 50 other active bidders of our paper; the issue was 1.3 times overbid,” Mr Barry said.

“The 2020-S1 bids also confirm the strength of our RMBS program, business platform and the quality of underlying assets in what remains an unclear global investment environment.”

He added that the lender has maintained $488 million of “shock absorber and regulatory capital”.

Mr Barry said: “With this RMBS transaction, we achieved our goal of competitive pricing, notwithstanding increased levels of market supply and note participation from a select group of chosen investors comprising six domestic and four international investors from Europe and Asia.”

“The proceeds of the issue will be used by La Trobe Financial to continue writing home and business loans for everyday Australians at a critical time in the history of our economy,” he said.

Around 84 per cent of the transaction was placed with institutional, real money investors across the structure, while 59 per cent was placed with international investors.

The lender will pay 100 bps over the bank bill swap rate (BBSW) on $90 million of A1S notes, which have a weighted average life of 0.4 years.

Pricing on $260 million of A1L notes, which have a weighted average life of 3.10 years, was 175 basis points over BBSW.

Pricing on $77 million of A2 notes, which have a weighted average life of 4.80 years was 195 basis points over BBSW.

The lender announced a $1.25 billion RMBS transaction in May in order to continue writing home and business loans for customers during COVID-19.

The AOFM was involved with the deal but no investment from them was required due to investor demand.

[Related: La Trobe Financial eyes new product launches]

La Trobe Financial prices $500m RMBS
La Trobe Financial prices $500m RMBS
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Malavika Santhebennur

Malavika Santhebennur is the features editor on the mortgages titles at Momentum Media.

Before joining the team in 2019, Malavika held roles with Money Management and Benchmark Media. She has been writing about financial services for the past six years.

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