Yellow Brick Road (YBR) has announced that it has entered into definitive legal documentation with an affiliate of global alternative asset manager Magnetar Capital (Magnetar) relating to the establishment of a joint venture designed to establish a mortgage-backed securities securitisation business.
As part of the agreement, the US-based asset management business – which has approximately US$12.9 billion in assets under management – will assume 50 per cent ownership of YBR subsidiary Resi Wholesale Funding (RWF) following the completion of the transaction.
RWF will be the intended trust manager, servicer and sponsor of the residential mortgage-backed securities (RMBS) securitisation business for which YBR received credit approval for a $120-million warehouse facility on 29 August 2019.
Under the terms of the share subscription deed entered into between the parties, Magnetar will subscribe for 50 per cent of the share capital in RWF for an aggregate $18 million in two tranches and has agreed to provide a facility for $6 million in future funding for B Class Notes for the RMBS facility.
Additionally, subject to mutually agreed definitive documentation and terms, Magnetar has conditionally committed to provide and/or arrange a facility for approximately $60 million in future funding under subordinated notes for the RMBS warehouse facility.
Completion of the share subscription deed is conditional upon:
- approval from the Foreign Investment Review Board
- RWF and others entering into definitive legally binding transaction documentation with the RMBS warehouse facility bank lender and all other relevant third parties; and
- other transactional matters.
Following the announcement, YBR executive chairman Mark Bouris said: “We are pleased to team up with a group of Magnetar’s calibre.
“They have been a supportive and patient partner in this journey, and the combination of their capital and the YBR Group’s mortgage distribution capabilities, plus our joint experience and prowess in the securitisation markets, will make for a formidable new funding force in the Australian mortgage market.”
YBR to issue 40 million new shares
Further to the joint venture, YBR has announced that, subject to FIRB approval, it will issue 40 million new ordinary share to Magnetar Capital at $0.06 per share, to raise approximately A$2.4 million via a private placement.
If approved by the FIRB, the new share issuance, which does not require shareholder approval, will constitute a stake of approximately 12.3 per cent.
YBR has stated that the funds to be raised by the share placement will be deployed by the group for working capital purposes and to "accelerate its securitisation initiative".
[Related: YBR secures RMBS warehouse facility]