Non-bank lender Firstmac prices $1.2 billion Residential Mortgage-Backed Securities issue
Non-bank lender Firstmac has dispelled fears about weakness in the Residential Mortgage-Backed Securities (RMBS) market by successfully pricing a $1.2 billion issue at a tight yield.
Chief Financial Officer James Austin said the success of the issue showed that the market had recovered after 12 months of weakness.
“There’s a strong rally underway with very strong demand for paper which is reflected in the much lower rate we paid for this issue than our issue last year,” Austin said.
“The lower rates reflect confidence in the quality of Firstmac’s loan book specifically and also renewed investor confidence that Australian borrowers more broadly are safe as they continue to demonstrate their resilience in the face of 12 consecutive RBA rate hikes.”
Austin said the publicly-offered component of the Residential Mortgage-Backed Securities issue was oversubscribed almost five times.
The issue price of +130 over the Bank Bill Swap Rate (BBSW) compared favourably the +153 over BBSW for Firstmac’s previous benchmark issue in October 2022 at the start of the RBAs tightening cycle and global quantitative tightening.
Austin said Firstmac was so confident in the quality of its loan book that it provided monthly data on its loan book to investors, making it the most transparent lender in Australia.
“This demonstrates how strong our credit quality is with 30+ day arrears less than 0.50%, much lower than the vast majority of banks,” Austin added.
Austin said the latest RMBS issue, which was all prime benchmark collateral, would fund Firstmac’s operations in a home loan market that was normalising after a period of heavy discounting caused by the now-terminated Federal Government’s Term Funding Facility.
“This issue means we’ll continue to have a forceful presence in the lending market, offering a real alternative to the big banks,” Austin ended.
The issue brings the total amount of RMBS issued by Firstmac since 2003, to more than $42 billion.