Firstmac Partners with DBS for Australian RMBS Issue
The $500 million RMBS issue, which was co-managed by DBS Bank, was priced at 150 basis points over the Bank Bill Swap Rate, which compares favourably with recent issues by major Australian banks.
Firstmac CFO James Austin said Firstmac had appointed DBS Bank to the issue because of its unparalleled distribution network in Asia.
“Firstmac has had a permanent presence in Singapore for four years and the importance of our Singaporean investor base has grown steadily,” Mr Austin said.
“When we sought out a major institutional partner, DBS Bank was the natural choice because of its size, skills, and commitment to the Australian market, where it has recently opened its first office.”
Mr Austin said the success of the deal reflected the confidence of major institutional investors in the quality of Firstmac’s online loan book, its tough credit policies and its effective self-regulation.
“The RMBS market is functioning well but spreads are wider than six months ago and investors remain relatively cautious,” Mr Austin said.
“Despite this, we have been able to tap the market at a narrower than usual gap to the majors due to institutional support for our high-quality book, tight credit policies, and continued lending discipline.”
Firstmac is in the Top 10 RMBS issuers in Australia and this transaction takes Firstmac’s RMBS issuance since 2003 to more than $16 billion. Its most recent prior issues were a $500 million issue in November 2015 and $1 billion in May 2015.
Mr Austin said the issue had been well supported by investors, with a total of 14 investors participating in the transaction including 9 real money accounts. It was jointly led by Australia and New Zealand Banking Group, and National Australia Bank.
In a signal about the future direction of the Australian mortgage lending market, the capital raising by Firstmac was mainly secured against mortgages written by related company loans.com.au, which is Australia’s biggest online lender.
Firstmac CFO James Austin said the strong support for the issue from domestic institutions reflected the growing realisation that loans.com.au’s online borrowers were a lower credit risk than the typical borrower who walks into a bank branch.
Mortgages issued by Firstmac and loans.com.au have a level of arrears that is only 0.47 per cent, less than half the industry average of 1.11%.
Firstmac Limited is Australia’s largest non-bank lender, with more than 35 years’ experience in home and investment loans. Firstmac has written in excess of 100,000 home loans and manages approximately $8 billion in mortgages and $250 million in cash investments. Firstmac is a premier sponsor of the Brisbane Broncos.
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