ING Office Fund has launched the first commercial mortgage-backed securitization of the year, and it is the first CMBS deal in the Australian market to carry no terrorist insurance on the underlying real estate.
The A$408 million deal (U.S.$206.7 million), arranged and lead-managed by Westpac Institutional Bank with JP Morgan as co-manager, is offering Class A notes rated AAA by Standard & Poor's with a scheduled maturity of February 8, 2007, and final maturity of August 18, 2008. According to S&P the risk to investors posed by the absence of terrorism insurance - carved out of most commercial property insurance contracts since the Sept. 11 outrage - has been sufficiently mitigated within the structure by portfolio diversification and other factors.
The portfolio consists of 18 high quality assets including ING's own offices in Sydney. The deal, which refinances bank debt, was expected to price in "the low 40s" above swap, 55 basis points all up, compared to the 75-80 basis points banks are charging for the standard three-year loan maturity offered to commercial property borrowers.
SG Australia has priced A$253 million (U.S.$128.1 million) of class A notes on behalf of Heritage Building Society at at 36 basis points over the one-month bank bill swap rate, in a deal said to have been oversubscribed with strong demand from offshore investors. The notes, rated AAA' by S&P, were backed by A$7 million of class B notes, rated AA-'.
The pricing of the class B notes was not disclosed. The class A notes are expected to have a weighted average life of 3.4 years and the class B notes 5.5 years. HBS Trust 2002-1 is the third public MBS issue of loans on behalf of the building society since April 2001.