S.A. Home Loans, the South African institution set up to undercut the country's major banks in the mortgage sector, recently unveiled details of alliances struck with J.P. Morgan South Africa and Standard Bank.
The two banks have acquired small equity stakes in the S.A. Home Loans, joining Peregrine Holdings, the International Bank of Southern Africa and the International Finance Corp., an affiliate of the World Bank.
Simon Stockley, founder and chief executive officer of S.A. Home Loans, believes the additional support of J.P. Morgan and Standard will help the mortgage lender reach its targets quicker, one of which is to be a regular visitor to the mortgage-backed securities market.
"Given the substantial growth of the loan book since we launched last February, and the need to attract additional lending capacity, we felt the timing was right to take on further equity partners who would add value to the business," Stockley said. "The increased funding base and inherent strength of our new shareholders allows us to aggressively expand market penetration and to examine a broader range of both lending and funding opportunities."
The equity stakes come almost immediately after J.P. Morgan set up a 1 billion rand ($140 million) syndicated loan facility for S.A. Home Loans, for which Standard will lead the lending consortium. Fitch IBCA South Africa will rate the assets brought under the loan as AAA, and there are plans to bring more international lenders to the consortium later this year.
"We approached Standard Bank to participate in the syndicate as they have shown themselves to be innovative and very experienced in the home loan market," explained John Coulter, managing director of J.P. Morgan South Africa. "In addition, they are interested in establishing an asset-backed securitization industry in South Africa."
That is something that all three partners expect will happen. Further, S.A. Home Loans hopes to pay back the syndicated loan by way of a residential MBS planned for early next year. J.P. Morgan and Standard will arrange that offering.
The transaction will not be SA Home Loans' first foray into securitization. The company made its debut in July (ASRI 7/3/2000 p.1) with a 142.4 million rand deal backed by a pool of residential mortgages. The transaction, called MBT Series 2000, was given an AAA rating by Fitch.