Allied Credit has priced its inaugural asset-backed securitisation, which is expected to settle this week.
Since being established in 2010, initially to provide retail finance products to Kawasaki’s Australian motorcycle and jetski dealer network, Allied Finance has expanded its services, and attracted a cast of heavyweight backers and joint venture partners.
This was an equipment finance relationship once serviced by CIT Group. Bank of Queensland was the buyer of most but not all of the Australian and New Zealand business of CIT Group back in 2010 and the financing needs of Kawasaki’s clients has evolved into Allied Credit.
In 2013 Allied formed a joint venture with Mercury Power International to offer retail finance products to Mercury’s Australian marine dealer network. It started offering branded Triumph, Vespa and Piaggio finance products to retail customers in 2015 and floorplan finance to all dealers across a broad range of brands and assets including Kawasaki, Triumph, Vespa, Piaggio, Moto Guzzi and Aprilia in 2016.
According the company's website, the Allied Credit board includes former Rothschild banker Justin Lewis (and a founder of Sturt Capital Partners, one of Allied Credit's largest investors) and former Hoyts chief executive Peter Ivany.
They are joined by a line-up of investors that – according to Nine/Fairfax media reports – includes former UBS investment banker, Guy Fowler, his former high-flying boss at UBS Australia, Matthew Grounds, the businessmen Chris Hadley, Nick Politis and Richard Elmslie, and lender SocietyOne.
Fowler, who left UBS in 2019, has reportedly invested $4 million in the company in late 2018 and joined Allied Credit’s board.
This transaction, capped at A$200 million, was the first term securitisation in Australia to have been backed by motorcycle, marine and leisure receivables – that is, loans for bikes, boats and jetskis.
According to a media release from Allied Credit, there was strong investor interest, with the transaction remaining oversubscribed.
The privately held company, which was set up 10 years ago, has been a prolific source of Australia's customer finance for many of biggest names in motorcycling and power boating.
Allied Credit's total loan book was around A$430 million as at 31 August 2020, according to the pre-sale report on this deal by Moody's Investors Service.
Allied Credit chief executive officer Jon Moodie said access to the public securitisation market via this transaction was "particularly important" for his firm and its joint venture partners as it will diversify their funding pool and increase funding security.
The key elements of this transaction were:
• the most senior tranche of the six tranches was provisionally rated Aaa(sf) by Moody’s and was priced at 1.60 per cent over one-month BBSW - this tranche represented 74.5 per cent of the value of notes on offer;
• the notes are backed by 17,045 loan contracts, with a weighted average interest rate of 10.2 per cent;
• the collateral pool is largely comprised of consumer loans (97.2 per cent), backed by a mix of assets that is dominated by motorcycles (71 per cent), with marine assets a distant second (15 per cent);
• the average seasoning (ie, the time that each of the loans has been running) was around 13 months, while the weighted average remaining term of the portfolio is 46.9 months; and
• National Australia Bank was the arranger and one of two joint lead managers, along with Macquarie Bank.
While this is the first securitisation of motorcycle loans in Australia, it's less remarkable by world standards. For example, the Harley-Davidson Credit Corporation has been running what Moody's has described as "a well-established securitisation programme" in the US since at least 2015.