It is set to be a busy September for the Australian market, with several transactions in the pipeline. Among those set to close deals are ANZ Bank, St. George Bank and Interstar Wholesale Finance.
The most significant offering is undoubtedly ANZ's first and Australia's largest ever domestic synthetic collateralized loan obligation. ANZ is joint arranger with Barclays Capital on the A$975 million ($749.6 million) issue, which sells protection over a diverse range of corporate credits.
Aside from Australia, roadshows will be held in Hong Kong, Singapore, London and Dublin with pricing expected on or before Sept.18.
Issued via the Resonance Funding Series facility, the deal is tied to 110 corporate loans drawn from a range of sectors including agriculture, food, media, construction and finance. Around 75% of the obligors are Australian credits, with the remainder from New Zealand, United Kingdom, United States and Hong Kong.
Payment of principal and interest for the notes is linked via a credit default swap between the SPV and ANZ to the credit performance of the underlying portfolio. Credit support for investors will come chiefly through a first loss piece equal to 2.5% of the pool that will be retained by ANZ and subordination.
The transaction is split into seven tranches, including an A$830 million super senior piece rated triple-A by Moody's Investors Service and Standard & Poor's. The six subordinated tranches have ratings ranging from triple-A down to BB'/'Ba1'.
All seven tranches have scheduled maturities of three years and a legal final of 4.5-years. Price guidance for the super senior tranche is 20 basis points over the Bank Bills Swap Rate, while the class-B triple-A paper is expected to offer a 25 point spread.
Synthetic balance sheet CLOs remain a rarity among Australian banks due largely to the small number of rated credits in the domestic market. Prior to ANZ, the most recent synthetic CLO was National Australia Bank's $1.28 billion cross-border issue in December 2005.
Meanwhile, St. George Bank last week began roadshows for the latest global RMBS from its Crusade facility. The borrower and lead manager Credit Suisse has met with Asian and European accounts, and will this week meet U.S. investors.
The A$3 billion-equivalent three-currency offering is backed by a pool of 12,000 mortgages with a weighted average loan-to-value of 65.8% and seasoning of 14.6 months. Low documentation loans account for 9.4% of the pool, which features 100% mortgage insurance from St. George, PMI Insurance and Genworth.
The five-tranche transaction is split into three triple-A pieces - as rated by Moody's, Fitch and S&P - including a US$1 billion piece, 400 million tranche and A$600 million domestic tranche. Two subordinated Aussie dollar tranches totaling A$67.5 million - and rated AA' and A+' by S&P - have been structured into the issue.
St George Bank becomes the second Aussie borrower to issue a Reg AB U.S.-dollar tranche, registered with the Securities and Exchange Commission. Commonwealth Bank of Australia was the first to do so in March with an A$5.5 billion global offering (ASR, 03/13/06).
While Reg AB tranches require greater levels of disclosure and prep work than 144A private placements, a well-placed source said this would benefit Aussie RMBS borrowers in the longterm.
"To be Reg AB compliant really tests the internal systems of the borrower, which is why there have been delays to several transactions from U.K. mortgage originators," the source says. "Up until now, most of the U.S.-dollar deals by Aussie borrowers have been 144A private placements. There has not yet been a pricing penalty for doing deals that way, but in the long run investors might assess things differently when they compare the difference in disclosure between 144A and Reg AB. The fact the latter route offers access to a deeper investor base may also be beneficial in terms of pricing."
St George's most recent global deal in February saw pricing of six basis points over Libor for the U.S. piece, eight points over Euribor for the euro tranche and 14 points over BBSW for the senior domestic notes (ASR, 02/27/06).
As of press time, Interstar was due to price an A$1 billion deal backed by 100% of low-documentation mortgages. Barclays Capital and Deutsche Bank are joint arrangers on the issue, with Genworth and PMI providing mortgage insurance.
The deal is backed by 4430 loans with a current LTV of 69.8% and seasoning of 5.8 months.
Moody's and S&P assigned triple-A ratings to the A-class and B-class notes, while the C-class notes and D-notes are rated Aa1'/ AAA' and Aa2'/'AA', respectively.
Price guidance was not available, although a relevant benchmark would be Macquarie Securitisation's A$1 billion 100% low-doc deal completed in May (ASR, 06/5/06). The triple-A notes priced at 19 basis points over BBSW on a 2.6-year average life. Given Macquarie's status as Australia's most frequent issuer, Interstar's issue may finish at least a couple of basis points wider.
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