National Australia Bank, owner of the ill-fated HomeSide mortgage finance business in the United States, is entering the U.S. asset-backed commercial paper market with its A$5 billion Titan multi-seller program, launched in Australia three years ago. The move comes as NAB launches a second multi-seller program in the domestic market, Quasar, with an initial issuance ceiling of A$3 billion. Both are "black box" structures.
Titan is rated A-1+ and P-1 respectively by Standard & Poor's and Moody's Investors Service, and securitizes a broad range of assets including loans and leases. Although the bank refuses to divulge the exact nature of the assets or the identity of the originators, all assets are sourced from third-party corporates, mainly the bank's own clients.
NAB has not originated any of the assets. According to the bank's head of globalization, Ross Bacon, 14 trusts have been established to manage the assets provided by each seller into the program. About A$1.1 billion of assets are in the structure, which has around A$1.2 billion of CP on issue.
Another A$500 million of assets is "in the pipeline." NAB is also about to begin sourcing assets for Titan from New Zealand. These, like the Australian assets, could be funded by in part by U.S. CP.
Quasar is similar in most respects to Titan, except that it will be - initially at least - domestically focused, and is rated lower, at A-1 and A-2. Part of the rationale behind Quasar's launch, according to Bacon, is based on the fact that a number of Australian corporates have been downgraded, leaving a gap in the market for A-1 rated CP. Quasar proposes to fill the void with its asset-backed paper.
Investors are likely to be attracted to the idea: in Australia, asset-backed CP trades at a premium to straight corporate paper of an equivalent rating. NAB is lead manager on both programs. Bacon's division within the bank is separate from that responsible for HomeSide.
