Lenders were active in the securitisation market last week, with Bluestone and RedZed Lending Solutions completing issues of residential mortgage-backed securities and Liberty Financial pricing a securitisation of small-to-medium business loans.
In positive signs for the market, Bluestone was able to price at tighter margins than its previous deal in July, and none of the issuers relied on support from the Australian Office of Financial Management. The total raised was A$1.3 billion.
After issuing $350 million of RMBS in July, Bluestone followed up with another $350 million deal last week. The latest issue, Sapphire XXIV 2020-2, is made up of 92.4 per cent prime and near-prime loans.
Bluestone managing director, treasury and funding, Todd Lawler said the transaction was almost three times oversubscribed, with 42 per cent of bids from offshore. No AOFM support was required.
The issue included A$94.5 million of A1S notes, with a weighted average life of 0.6 years and rated AAA, priced at 90 basis points over the one-month bank bill swap rate.
Pricing on the A1S notes in the July transaction was 95 bps over one-month BBSW.
Pricing on the $150.5 million of A1L notes, which have a weighted average life of 2.9 years and a AAA rating, was 160 bps over one-month BBSW.
Pricing of the A1L notes in the July transaction was 165 bps over one-month BBSW.
Pricing on the $61.25 million of A2 notes, which have a weighted average life of 2.9 years and a AAA rating, was 180 bps over one-month BBSW.
In the July transaction, the A2 notes, which had a shorter tenor of 2.5 years, were priced at 210 bps over one-month BBSW.
The B, C, D, E and F notes, rated between AA and B, were priced in a range from 280 bps to 900 bps.
RedZed completed a $400 million transaction, RedZed Trust Series 2020-2, which followed a $300 million deal in June. As with the Bluestone issue, AOFM support was not required.
Pricing on the $115 million of A1S notes, with a weighted average life of 0.6 years and a AAA rating, was 95 bps over one-month BBSW.
Pricing on $165 million of A1L notes, which have a weighted average life of 2.9 years and a AAA rating, was 165 bps over one-month BBSW. And pricing of the $62 million of A2 notes, which have a weighted average life of 2.9 years and a AAA rating, was 185 bps over one-month BBSW.
The Liberty Series 2020-1 SME transaction is the sixty-second public term securitisation for the non-bank lender and is Liberty’s ninth securitisation of securities backed by a portfolio of its SME loans. These now total well over $3 billion.
The structure is similar to Liberty's most recent SME loan securitisation deal, completed in October 2019. It was launched at $400 million, and upsized to $550 million.
Once again, Liberty said, the strong investor demand across all offered tranches saw the transaction upsized from a launch volume of $400 million to $600 million. The top two tranches – the only notes for which pricing has been disclosed – were both priced at 25 basis points over their comparable notes in the 2019 deal.
For the Liberty Series 2020-1 SME transaction:
• the A$390.0 million Class A1 notes, to be rated Aaa(sf) by Moody's with a weighted average life of about 2.7 years, were priced at a margin of 160 basis points over one-month BBSW (as with the Liberty Series 2019-1 SME transaction, this deal featured a super-senior tranche of Class A1 notes, which benefitted from over two times the subordination required to achieve a Aaa-rating from Moody’s);
• the A$108.0 million Class A2 notes, to be rated Aaa(sf) with a weighted average life of about 3.8 years, priced at a margin of 200 basis points over one-month BBSW; and
• the pricing of the Class B,C, D, E and F notes – to be rated Aa1(sf), Aa2(sf), A2(sf), Baa3(sf) and B3(sf), respectively – was not disclosed by the issuer or the bankers who ran the deal.
The issue consists of a pool of SME mortgages with a weighted average loan-to-value ratio of 61 per cent and is seasoned at 20 months – that is, the loans that are backing these notes have been underway for 20 months. This puts it at a slightly stronger position than Liberty's comparable SME loan securitisation in October 2019.
The Liberty Series 2020-1 SME transaction will settle on 10 September 2020.
Westpac Banking Corporation is the sole arranger, and also a joint lead manager, along with Credit Suisse.
Liberty is Australia’s only investment grade rated non-bank issuer (BBB-, outlook stable by S&P) and claims bragging rights as one of only a few lenders with an unblemished capital markets record – ie, no ratings downgrades or charge-offs have ever been experienced by its securitisation program.