Pepper Residential Securities Trust No.12

Bernard Kellerman
Non-bank mortgage outfit Pepper Homeloans has launched an Australian non-conforming RMBS transaction, secured by a portfolio of Pepper's residential mortgage loans.

According to a pre-sale report from Moody's Investors Service, "a substantial portion" of the portfolio consists of loans extended to borrowers with impaired credit histories (44.5 per cent) or made on a limited documentation basis (48.7 per cent)."

The new non-conforming RMBS will be known as Pepper Residential Securities Trust No.12, and is indeed Pepper's 12th non-conforming securitisation. Moody's pre-sale note indicates the home mortgage provider is looking to raise about A$500 million, with up to US$200 million allocated to USD investors.

Among this transaction's unique aspects are the use of Class A1-u1 notes which are hard-bullet with a one year maturity. The principal within the Class A notes is repaid on a pro-rata basis.

In addition the Class A1-u1 notes are USD-denominated. To facilitate the redemption of the Class A1-u1 notes at their legal final maturity, new USD denominated Class A1-u2 notes with a legal final maturity of one year or new floating rate, pass-through AUD denominated Class AR-u notes will be issued.

The Class B, Class C, Class D, Class E, Class F and Class G Notes are not rated by Moody's.