feature
A new complexion On the back of significant price contraction, the Australian market is heading for a bumper year of residential mortgagebacked securities (RMBS) issues – even without government support. Market participants discuss their buying and selling plans as the Australian securitisation sector presents a new face to the world.
By Kimberley Gaskin
an n u a l a b s vol u me s fr o m a u s t r a lia n i ssuers
volume (A$BN equiv.)
70 60
25.0
50 40 30
25.9
40.0 31.9
0.97
20 2.0
10 0
8.4 2006
2007 AUD volume
2008
22.0
0.0 10.0 2009
2.9 24.6
2.4 15.4
2010
2011
2012
Foreign currency volume (AUD equiv.)
S O URCE: KAN GAN EWS M AY 13 2013
14 · Australian Securitisation Journal | Issue 04_2013
0.3 10.5 2013 YTD
B
etween mid-2012 and the end of the first quarter in 2013, the face of the Australian securitisation market appears to have changed complexion. Over a disappointing 2012 just A$15.4 billion (US$15.7 billion) priced, well below the A$27.5 billion and A$23 billion that came to market in 2011 and 2010, respectively (see chart on this page). The slump was at least in part a consequence of the launch of domestic covered bond programmes by Australian banks. However, issuance equilibrium has clearly reset the market in 2013. The first quarter of the new year was the busiest since the onset of the financial crisis. Some A$8.2 billion priced over the first three months of the year, more than half the fullyear volume from 2012 according to KangaNews data. This was the biggest first-quarter volume in Australia’s securitisation market since 2007. Four more deals in April and May brought the total in the year to May 23 to A$10.5 billion. “The market opened very strongly – deals were upsized and priced at the tight end of or inside guidance,” comments Kevin Lee, Sydneybased division director, debt origination and structuring at Macquarie Bank (Macquarie). While execution risk has by no means been completely eliminated, Robert Verlander, head of corporate finance securitisation at Commonwealth Bank (CommBank) in Sydney, confirms that it is a very different market compared with six months ago. “In August 2012 there were challenges in getting deals done at prices and volumes that made sense. But this year issuers have been able to do deals at increasingly tight prices at numbers that work,” he says. “As a consequence, securitisation is again playing a more central role in how issuers fund themselves.” The market confidence has had a positive effect on the banks, notes Mary Ploughman, executive director of securitisation at Resimac in Sydney. “We are no longer having any issues with warehouse providers, which was very difficult for a while,” she comments. “Bank confidence is critical for our business model.”
supply surge The range of borrowers coming to market reflects the window of opportunity and the broad spectrum of appetite from investors for different names. After two of the first three RMBS deals of the year came to market from major bank issuers, the next three all provided funding for non-bank names. Two nonconforming deals, totalling A$727 million, from Liberty Financial (Liberty) and Pepper Group (Pepper) also priced. Two new issuers, Columbus Capital and AFG, also came to market. The appearance of two debutants heralded a sense of confidence in the newly strong market. John Barry, general manager and head of securitisation at National Australia Bank (NAB) in Melbourne, is confident the activity is indicative of reaching total annual issuance close to 2011