Pepper issues first non-conforming RMBS since 2008

Pepper Australia is using the last real working days of 2010 to refinance a A$263 million pool of home loans in its first mortgage-backed securities deal of the year. The financing is noteworthy as this is the first non-conforming RMBS to hit the Australian market since early 2008.

The pool comprises of 40 per cent of credit-impaired loans, while 17.3 per cent are made up of investment loans and 29.8 per cent are interest-only loans. The transaction includes the added feature of an excess reserve account, where a portion of excess income is set aside and made available to cover any potential future losses.

The only other deal of note in the debt capital market last week was Fortescue Metals nearly doubling the size of its offshore debt offering, raising US$1.5 billion against an expected raising of US$800 million.

The US$600 million issue of five year notes was issued at 6.375 per cent, which is much lower than the 7.0 per cent that the company is paying for the same tenure notes issue in late October. The balance, of US$900 million seven-year notes, was raised at a rate of 6.875 per cent.

Meanwhile, Origin Energy is planning to access new debt to fund the acquisition of New South Wales' energy assets. This has prompted ratings agency Fitch to place its debt on rating watch 'Negative'. Should some of this debt be refinanced to equity, as Origin says it will, Fitch will remove the rating from watch.

Santos may also issue additional senior debt to fund its share of the Gladstone LNG project. The company last week announced it has raised $500 million in equity via institutional placement to funds its equity component for the project.