insto - Australian financial markets

Westpac has launched $1 billion RMBS, known as the Series 2009-1 WST Trust. It is the first RMBS issue by a major Australian bank since the GFC. The RMBS issue is only available to institutional investors and will consist of:

• A$920m of Class A Notes expected to be rated AAA/Aaa
• A$55m of Class B Notes expected to be rated AA/Aa1
• A$25m of Class C Notes will be unrated
Class A notes will benefit from 8% subordination provided by the Class B and C notes.

Moody's said that mortgage borrowers' ability to repay their mortgages -- as measured by delinquencies rates -- continues to improve for both prime and non-conforming RMBS transactions despite a backdrop of increasing interest rates.

“This is because the overall rate reductions since September 2008 mean borrowers are still enjoying significantly lower repayments, and unemployment is still relatively low and is expected to peak at levels much lower than forecast at the start of the global credit crisis,” said Arthur Karabatsos, Moody's senior analyst.

Bendigo & Adelaide Bank (BEN) upsized its RMBS deal, known as TORRENS Series 2009-3 Trust, by $500 million to $1 billion on 2 December 2009. It was sold to a diverse range of investors: 59% was onshore and 41% went to European investors.

The margin for its AAA rated $58 million Class AB notes (WAL 4.8yr) and AA- rated $27 million Class B notes (WAL 4.8yr) are not disclosed. $915 million class-A notes (WAL 2.8yr) were priced at 135 basis points over BBSW. The notes will be listed with the ASX.

Bendigo and Adelaide Bank has announced the marketing of its latest mortgage backed securities issue under the TORRENS securitisation program, Series 2009-3 Trust. The bank noted that this the first RMBS from a regional bank without the support of the AOFM this year. The issue will be backed by Australian prime residential mortgages originated by Bendigo Bank.

Further ratings agency pre-sale commentary on the 4-class ME Bank deal, initially reported in this morning’s Overnight Credit Report, includes the following :

Mortgage finance lender FirstMac today (10 November) successfully upsized, placed and priced an RMBS deal with the support of the AOFM. The transaction was initially launched at A$400 million but was increased to A$470 million following greater than anticipated investor bids.

The FirstMac 2-2009 placement, arranged by HSBC Bank, includes A$215.14 million from the AOFM as a cornerstone investor, with A$254.86 million provided by an additional six domestic investors.

The ABS markets have been dormant for a year, cutting off funding to niche lenders. But were obituaries for Australia’s non-bank mortgage originators written prematurely, asks Lachlan Colquhoun.

Several September deals have encouraged issuers and also investors to think there is life in the assetbacked securitisation markets yet. These may be only stirrings, but among issuers at least there is a consensus that the next 12 months will be an improvement on the last period of darkness.

The local securitisation industry spent the week assessing the merits of the Treasury’s decision to extend the AOFM's RMBS investment scheme.

The announcement came at a time when the market for mortgage backed securities was in the early stages of resurrecting itself, but the commitment of new funds means that it may be a while yet before the market stands on its own two feet.

Arrears on loans underlying Australian residential mortgage backed securities have declined for the fifth consecutive month, according to data from S&P.

Second Quarter 2009 data showed that arrears as measured by S&P’s SPIN Index (Standard & Poor’s Mortgage Performance) fell from a record high of 1.84 per cent in January 2009 to 1.44 per cent.

Sub-prime mortgage arrears also fell from its January peak of 17.09 per cent to 13.61 per cent, comparable to mid-2007 levels.

In a clear sign that faith has been restored to the RMBS market, ME Bank has priced a A$1.255bn RMBS transaction.

ME Bank launched its second non-AOFM backed RMBS deal of the year -‘SMHL Securitisation Fund 2009-2’ earlier in the week at A$500 million but upsized the deal by more than double following strong demand.

Macquarie Bank is arranger of the transaction. Leads are Macquarie Bank, CBA and Deutsche Bank.

Tranche details are as follows;