South African mortgage company S.A. Home Loans last week announced details of its debut entry into the MBS market. The company, which is affiliated with the International Finance Corp. and was set up in 1999 (ASRI 2/22/1999 p.1) to provide low cost mortgage financing and refinancing, will launch a six-tranche deal in early July.

The transaction - via a special purpose vehicle called MBT Series 2000 -is the first in a series of MBS deals that the company plans this year, one of which will be worth in the region of R1 billion ($147 million), according to Simon Stockley, founder and chief executive officer of S.A. Home Loans. "This is the first of many such issuances from the emerging South African market," he said. "A number of other issues are awaiting an indication of investor interest following the first release."

The floating rate notes - MBT I through MBT VI - will total R142.4 million, with the individual tranches ranging in size from R20.8 million to R28.96 million. Each will have 20 year-final maturities and payment will be referenced to JIBAR (Johannesburg Inter Bank Agreed Rate).

The deal is backed by a pool of 661 mortgages worth almost R154 million, with an average loan-to-value ratio below 60%.

Credit enhancement for the deal comes in the form of overcollateralization and any excess spread accrued on the notes. According to Fitch, which rated the deal, default probability and loss severity levels are anticipated to be at approximately 50% of the level of the credit enhancement in the structure.

Fitch gave an AAA rating to all the notes, which Stockley was understandably pleased with. "We are obviously encouraged by the rating," he said. "It is a positive endorsement of our origination philosophy and places us in a strong position for the placement of mortgage-backed securities in the future."

Stockley added that for the first issue, the bonds would be privately placed with institutional investors in South Africa. For future deals, the company plans to target investors in the Eurobond market.

Stockley declined to confirm the identity of the deal arranger.

The deal follows hot on the heels of South Africa's debut cross-border deal in the public ABS market: FirstRand Bank's recent $250 million securitization of credit card receivables, which was arranged by Credit Suisse First Boston's European securitization team (ASRI 6/5/2000 p.1).

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