FirstMac and Members Equity head AOFM queue

FirstMac and Members Equity Bank are the first two mortgage funders selected by the Australian Office of Financial Management for co-investment in pools of mortgage-backed securities. The AOFM advised the two lenders and the market yesterday afternoon of their decision, and their intention to invest "up to" $500 million in each transaction.

The basis for the AOFM's selection of each funder isn't clear though a recent history of securitisation activity and of advanced preparations for a transaction might be two reasons.

The funders also appear to have co-investors in the wings, including in one case their arrangers and lead managers. These are ANZ, HSBC and Macquarie Bank in the case of FirstMac, and Westpac and Credit Suisse in the case of Members Equity.

Pricing is yet to be resolved. FirstMac two weeks ago refinanced a $173 million pool of loans at a spread of 160 basis points over the one-month swap rate. This pool was originally sourced by HSBC through brokers with management rights sold to FirstMac in early 2007.

Members Equity sold $770 million of prime loans in two RMBS transactions in July in what turned out to be an Indian summer for the market and at spreads of 120 bps over swap.

The AOFM said in an email to market participants yesterday that it received 12 submissions. The AOFM said it would select two more proposals next month for investment this year. The Australian government investment arm may invest up to a further $3 billion at that stage if it follows earlier policy announcements.

The AOFM said it will issue a request for proposal on an additional investment round in November.

Meanwhile FirstMac failed in a bid to elect one of its directors to the board of The Rock Building Society. Rod Minnell attracted 14 per cent of the vote from shareholders at The Rock's annual meeting in Rockhampton yesterday afternoon.