Despite synthetic balance sheet collateralized loan obligations by Australian banks being a relatively new asset class, widespread demand caused ANZ Bank last week to double the size of its debut CLO from A$1 billion ($753.5 million) to A$2.2 billion.
With A$2.145 billion of the notes sold publicly - ANZ retained the 2.5% first loss piece - the transaction was the largest domestic capital market placement of any type by an Australian borrower.
ANZ self arranged and led the underwriting effort on the deal - called Resonance Funding Series 2006-1 - with Barclays Capital as co-manager. The issue is tied to 110 corporate loans with 84% of the obligors domiciled in Australia and New Zealand.
All eight tranches have an expected maturity of three years. The A$1.4 billion super senior floating rate piece - rated triple-A by Moody's Investors Service and Standard & Poor's - priced where it was marketed at 20 basis points over the Bank Bills Swap Rate (BBSW). The A$430 million fixed-rate super senior piece - also rated triple-A - offers a 6.56% coupon, while the A$220 million senior tranche priced in line with expectations at 25 over BBSW.
Spreads were undisclosed for the five subordinated tranches, which totalled A$99 million and with ratings ranging from Aa1'/'AA' to Ba1'/'BB'.
According to ANZ, over 50 accounts participated with interest coming from fund managers, industry funds, middle market investors, banks and structured investment vehicles. Also, 57% of the bonds placed in Australia and New Zealand; 37% went to Europe and 6% to Asian investors.
"We are delighted with the investor response to this transaction, and have upsized the deal to accommodate the very high level of investor demand," says Steve Targett, group managing director of institutional banking at ANZ. "This transaction clearly demonstrates the depth of the Australian dollar market, especially given this is a relatively new asset class for many of our investors."
National Australia Bank is expected to price a $1.5 billion synthetic CLO sold via the Southern Cross SPV last week (ASR, 9/18/06).
Staying in Australia, another bank to benefit from the strong bid for Aussie paper was St. George Bank, which saw the latest global RMBS from its Crusade facility upped from A$2.6 billion-equivalent to A$3 billion (ASR, 9/11/06).
The deal was arranged by Credit Suisse, which jointly led the underwriting effort for the U.S. dollar and euro tranches with Deutsche Bank. St. George was joint lead for the three domestic pieces.
St. George became the second Aussie bank after Commonwealth Bank of Australia to sell a Reg AB compliant (registered with the Securities and Exchange Commission) U.S.-dollar tranche. The $1.2 billion piece - rated triple-A by Fitch Ratings, Moody's and S&P - priced in line with market talk at six basis points over Libor for a 2.93-year average life.
Additionally, the 450 million A2 tranche - also rated triple-A - offers eight basis points over Euribor for 2.93-years, while the A$600 million senior domestic tranche pays 16 basis points over BBSW for 2.84-years.
Two subordinated tranches were structured into the deal. The double-A rated A$53.2 million B-series notes ended 22 over BBSW for 4.9-years, while the A$24.3 million C-tranche offers a 32 point pick-up.
Meanwhile, Member's Equity Bank will shortly become the third Australian bank to sell a Reg AB tranche. The bank last week launched a A$2.75 billion-equivalent global RMBS through its SMHL program.
Credit Suisse arranged the deal. It is joined in the underwriting effort by Societe Generale on the U.S. dollar and Euro bonds and National Australia Bank for the domestic tranches. Pricing is due this week.
The transaction, which features no low-documentation loans, is backed by 20,646 prime mortgages. The current weighted loan-to-value of the pool is 62.59% with seasoning of 18.34 months.
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