The market for mortgage finance might be at a standstill in the U.S. and thawing in Europe, but Australian loan originators have a new source of financing, if indirectly, in the form of the National Australia Bank (NAB).

One of Australia's four largest banks, NAB has put together an asset-backed commercial paper program called MiraStar Securitization, which will invest in Australian prime residential mortgages. MiraStar is slated to begin issuing ABCP in early April - as early as this week - and the first series of notes has an issuance limit of AUD 3 billion ($2.7 billion).

MiraStar is a partially supported, multiseller vehicle and, under the program structure, it will be allowed to create a number of a series of note purchases. MiraStar will not purchase ABCP or MTNs directly from sellers. Instead, it will fund special-purpose vehicles by subscribing for those notes. Those SPVs will use the proceeds from MiraStar to buy mortgage assets, according to Moody's Investors Service, which gave the program a P-1' rating. Standard & Poor's rated the program A-1+', but at press time, it was unclear whether Fitch Ratings would assess MiraStar.

As MiraStar adds subsequent series to the program, it will operate in a very compartmentalized way. MiraStar will not use cross-collateralization between any of the series as a means of support. In the event of default, which Moody's described as unlikely, the assets and supporting facilities of the ABCP series are unavailable to investors and other series participants.

MiraStar derives its credit enhancement from standby letters of credit from NAB in the amount of AUD 660,000. Those funds will be used to cover unanticipated expenses only.

As for liquidity support, the program sponsor has followed through with a liquidity support system that provides relief in the case of a market pullback of liquidity, not the poor performance of the assets. ABCP issued by MiraStar will be supported by seller-specific liquidity facilities. The NAB will provide the initial liquidity support, but there are opportunities for other P-1' rated counterparties to provide support for the facilities, as well.

Liquidity will be drawn if MiraStar is unable to retire maturing ABCP by issuing new ABCP. Normally, each liquidity facility would cover 100% of the notes outstanding, but that liquidity would not be available if a default occurs with respect to the underlying asset related to the notes.

Such liquidity support facilities are common, says Irene Kleyman, a Moody's analyst in Sydney. Aside from MiraStar, NAB also sponsors the Titan Securitization Ltd., Titan NZ Funding Trust, New Zealand Branch, Series 1, and Quasar Securitization Ltd.

(c) 2008 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.

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