Suncorp’s expanded deal takes RMBS supply from Australia this year past A$4bn ($3.12bn) and the market shows no sign of slowing down with Resimac joining National Australia Bank (Nab) in the pipeline.
Resimac has hired Commonwealth Bank of Australia and Nab’s investment bank to arrange a roadshow in Australia beginning on Monday, to sound out investors for a deal through the issuer’s Bastille programme.
Suncorp’s lead managers ANZ, Deutsche Bank, Macquarie and Westpac launched its deal on Monday, issuing price guidance on a full five tranche stack of notes totalling A$750m.
Rising Suncorp
Investors were initially offered A$690m of triple-A 3.1 year senior notes with 8% credit enhancement at price guidance of 90bp area over the one month bank bills swap rate.
The spread remained at 90bp when the deal was priced on Thursday, but the notes were increased to A$1.15bn.
That spread level is in line with the senior notes of Macquarie’s market opening Puma RMBS transaction earlier this month, though 10bp behind of Commonwealth Bank of Australia’s first effort of the year. Both deals featured 2.7 year senior notes.
Below the seniors came A$62.5m of AAA rated class ‘AB’ notes, A$30m of double-A rated class ‘B1’ notes, A$4.875m of A+ rated class ‘B2’ notes and a A$2.625m unrated class ‘B3’ tranche, all with 5.5 year weighted average lives and credit enhancement of 3%, 0.6%, 0.21% and zero, respectively.
These tranches were ultimately priced broadly in line with guidance at 175bp, 230bp, 310bp and 500bp over BBSW.
The indicative pool for Apollo 2015-1 comprises A$750m of loans with an average LTV of 65% and average seasoning of 46 months. Interest-only loans make up 15% of the pool.
New features
A new mechanism that switches off liquidity to the B1, B2 and B3 notes should any liquidity triggers applicable to the relevant class ‘B’ notes be met has also been added, according to Fitch’s presale.
“This feature mitigates the risk of the lower class ‘B’ notes drawing liquidity, particularly principal draws, while the transaction is either under stress from charge-offs or… heightened 60+ day average arrears, or if the payment date is after the call option date when concentration risk is more likely.”
Suncorp specifically targeted non-Australian investors with its last Apollo RMBS in May 2013, and ended up selling 30% of the bonds to offshore buyers.
The lender has recently been focussing on improving the quality of its mortgage book. In December, 86% of its mortgages had a loan-to-value ratio of less than 80%, compared to only 67% of mortgages a year earlier.