The domestic Australian mortgage-backed market regained enough confidence a week after the attack on the U.S. to enable wholesale home-loan financier, Interstar Securities, to launch the biggest deal yet seen in the sector - a A$1 billion transaction lead managed by Macquarie Bank.

The deal consists of five tranches, including four senior tranches rated AAA by Standard & Poor's. Three of the four are vanilla floating-rate: A2 is A$200 million, with a weighted average life of 1.6 years; A3 A$200 million, 2.8 years; and A4, A$475 million, 5.3 years. The A$55 million A4 tranche is structured and carries an AAAr rating from S&P (AAA from Fitch) and has a WAL of 5.3 years. The subordinated, floating-rate B tranche is rated AA- by both agencies and consists of A$70 million with a WAL of six years. All tranches are callable on October 7, 2002. Pricing is scheduled for September 25 with settlement three days later. National Australia Bank is co-lead.

Disrupted deals

At least two deals scheduled to launch during the week the attack took place were postponed. One of them was a global MBS, the first by an icon of the Australian non-bank mortgage industry - PUMA Finance, the flagship vehicle of Macquarie Bank subsidiary, Macquarie Securitisation.

Macquarie Securitisation managing director Tony Gill was in New York preparing to launch the deal; like other Macquarie staff living in, or visiting, NY, he was said to have been unharmed by the attack. Gill could not be contacted for comment as to when marketing of the US$1.2 billion PUMA Global Trust No.1 transaction might resume.

On the Friday before the attack, St. George priced an $800 million deal under its Crusade program. Immediately after the attack, there was speculation as to whether the deal would have been able to settle. St. George personnel confirmed, however, that settlement took place a week to the day after pricing. The AAA-rated deal, which had a weighted average life of 3.17 years, priced at 17.5 basis points above the three-month London interbank offered rate.

In February, the bank priced a $633 million transaction with a 3.23-year WAL at 19 basis points over the benchmark. Lead manager for the later deal was Credit Suisse First Boston with Deutsche Banc Alex. Brown and JPMorgan as co-managers. The transaction was backed by two domestic tranches - A$37.5 million rated AA and A$3.25 million rated single-A -pricing for which was not disclosed.

In the domestic market, Adelaide Bank delayed a A$600 million MBS issue under its Torrens Trust program until market conditions stabilized, and out of deference to the victims of the attack.

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