Investor demand for the innovative A$133 million commercial mortgage-backed securitization by retailer David Jones was sufficiently strong to cause lead manager Deutsche Bank to bring forward the pricing by a week.
The deal was part of an elaborate A$366 million sale-and-leaseback package, A$166 million which reflected the value of refurbishment work: the deal was said to be the first rated by Standard & Poor's involving a portfolio under refurbishment.
The notes, issued through CBD Retail Infrastructure (No. 1), had a June 2005 scheduled maturity and final maturity two years after that. The $54 million of Class A floating-rate notes were rated AAA by S&P, which rated the $20 million of Class B notes AA. The agency assigned a single A rating to the $16 million of Class C notes and BBB to the $43 million of Class D notes.
The tranches priced as follows: Class A, 44 basis points over the bank bill swap rate from December 15, 2000, to June 30, 2005, after which the coupon will increase to 69 basis points; Class B, 55 basis points over BBSW from December 15 to June 30, 2005, and 85 basis points thereafter; Class C, 87 basis points over the benchmark for the first four and a half years, then 137 basis points over; Class D, 115 basis points over BBSW between December 15 and June 30, 2005, then 190 basis points over BBSW.
RAMS Mortgage Corp. priced a A$600 million issue more tightly than a similar transaction earlier in the year, underlining the strength of domestic demand.
The deal, led by Salomon Smith Barney, consisted of four tranches of which two, totaling A$150 million, were sold publicly. The $120 million Class A1 senior bonds, callable after three years, were priced at 32 basis points over the one-month bank bill swap rate. The A$30 million subordinated tranche had an expected average life of 6.5 years and was priced at 55 basis points. The privately placed tranches consisted of A$150 million of Class A2 notes and and $300 million of Class A3 notes, with EALs of five and 6.4 years respectively.
Pricing on the tranches was kept confidential. The Class A were rated AAA by Standard & Poor's and the Class B notes, AA-. The weighted average margin over time of 38.04 basis points over the benchmark compared to 39.88 basis points on the previous deal in May.
Treasurer, Rowan Harry, said the strong local demand - which was unusual in December - reflected the low supply caused by the number of deals lined up for the for offshore markets next year.
Orix Australia Corp., the local subsidiary of the Japanese finance company, priced the fourth transaction under its Eden Park program shortly after Standard & Poor's upgraded the credit ratings on the subordinated tranches of the first and second deals under the program.
The upgrades were significant, in that they signaled growing market and local rating agency acceptance of deals backed by automobile and equipment commercial hire purchase and finance-lease agreements.
The A$200 million Eden Park No. 4 deal consisted of A$48 million of Class A1 notes with an expected average life (based on a constant prepayment rate of 16%) of 0.32 years; $97 million of Class A2 notes with an EAL of 1.32 years; $49.8 million of Class A3 notes with 2.49 year EAL and $5.2 million of subordinated Class B notes with an EAL of 3.42 years. The senior tranches were rated AAA by Standard & Poor's and the subordinated, single A. The pricing over the 30-day bank bill swap rate was 14, 25, 33 and 54 basis points respectively. The deal was led by Macquarie Bank.