ME surprises markets
(18 March 2010 – Australia) Members Equity has surprised markets by pricing A$1 billion in residential mortgage-backed securities without requiring any government support.
Prior to the announcement, ME had requested the government be ready to purchase part of its latest deal as the group was looking to make use of the governments program to purchase RMBS directly.
However, when the deal was priced, none was needed.
'For the first time ever, we were scaled back to zero. The market is clearly improving,' said Michael Bath, director of financial risk for the Australian Office of Financial Management.
Looking to stave off a competition backlash in Australia, the country's government started directly injecting money into RMBS offerings in October 2009.
The allocation has since been increased twice to its current A$20 billion, with the government having used about A$12 billion of that allocation.
Only four years ago, before a collapse in securitisation markets in the wake of the global financial crisis, the country's big four banks held only about 60 percent of the country's loans, as smaller non-deposit taking institutions that rely on securitisation markets as their primary source of funding were able to fund more loan writing.
Today, the country's four largest banks have about 80 percent of all mortgages as competition has waned after the credit crisis damped the local securitisation market -- the fourth largest in the world.
In the offering, called SMHL Securitisation Fund 2011-1, ME Bank priced A$934 million in Class A notes, A$46m in Class AB notes and A$20m in Class B notes, according to lead managers ANZ, National Australia Bank and Westpac.
The top tranche with a weighted average life of 2.9 years priced at 100 basis points over swap, while the Class AB bonds priced at 170 basis points over swap.
The Class A and Class AB bonds were rated AAA by Standard & Poor's and Fitch Ratings.
The deal marks ME Bank's first RMBS transaction since it priced $1.2bn in RMBS in July, with part of that offering denominated in US dollars.
However, when the deal was priced, none was needed.
'For the first time ever, we were scaled back to zero. The market is clearly improving,' said Michael Bath, director of financial risk for the Australian Office of Financial Management.
Looking to stave off a competition backlash in Australia, the country's government started directly injecting money into RMBS offerings in October 2009.
The allocation has since been increased twice to its current A$20 billion, with the government having used about A$12 billion of that allocation.
Only four years ago, before a collapse in securitisation markets in the wake of the global financial crisis, the country's big four banks held only about 60 percent of the country's loans, as smaller non-deposit taking institutions that rely on securitisation markets as their primary source of funding were able to fund more loan writing.
Today, the country's four largest banks have about 80 percent of all mortgages as competition has waned after the credit crisis damped the local securitisation market -- the fourth largest in the world.
In the offering, called SMHL Securitisation Fund 2011-1, ME Bank priced A$934 million in Class A notes, A$46m in Class AB notes and A$20m in Class B notes, according to lead managers ANZ, National Australia Bank and Westpac.
The top tranche with a weighted average life of 2.9 years priced at 100 basis points over swap, while the Class AB bonds priced at 170 basis points over swap.
The Class A and Class AB bonds were rated AAA by Standard & Poor's and Fitch Ratings.
The deal marks ME Bank's first RMBS transaction since it priced $1.2bn in RMBS in July, with part of that offering denominated in US dollars.
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