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NZF securitises $100 mill loan book

NZF Group has securitised $100 million of its loan book and plans to launch the country’s first residential mortgage-backed securities (RMBS) in almost three years to institutional investors.

Wednesday, 26 May 2010

by Paul McBeth

NZF Group has securitised $100 million of its loan book and plans to launch the country's first residential mortgage-backed securities (RMBS) in almost three years to institutional investors.

Managing director John Callaghan said the finance company is looking to raise $100 million from the RMBS, which is leading its recapitalisation plan. The issue is not open to the public, with minimum subscriptions of $500,000 targeted at institutions, and Callaghan said "initial interest in the issue has been strong."

The issue consists of four classes of notes, which provide credit support to higher class securities, almost all of which have been rated AAA by Standard & Poor's. The ratings agency said the credit support for the securities is "sufficient to withstand the pressures we apply" due to the subordination of the notes, the mortgage insurance covering 100% of the face value of all loans, accrued interest, and costs of enforcement.

NZF's $87.8 million issue class A1 notes are rated AAA, its $9.1 million issue of class A2 notes are also rated AAA, while the $2.5 million issue of class B notes have been rated AA-, and the $600,000 class C notes have not been rated.

S&P also approved of the RMBS' ability to maintain liquidity and make interest payments to investors. Over time, the credit risk from lower ranked notes is expected to reduce borrowers repay their loans.

Westpac Institutional Bank arranged the deal and will act as lead manager.

Still, the ratings agency said almost a third of the loans backing up the bonds have interest-only periods of up to five years, increasing the chance of default, and some 40% of security properties were outside New Zealand's main cities, also boosting the chance of non-payment.

The loan pool backing the securities is made up of 486 loans, 342 of which have been consolidated, at a total value of $99.7 million. The biggest loan is just over $1 million, and its average loan size is $291,000.



Comments from our readers

On 26 May 2010 at 7:15 pm J Sweatman said:
Please advertise who will buy these securities publicly so we, the other investors, will know who to stay away from when we invest.. I certainly don't want a bar of CDO's or their like!!!!
On 27 May 2010 at 7:59 am John Callaghan (NZF CEO) said:
J Sweatman. This is not a pool of CDO's it is a pool a quality residential mortgages in New Zealand with 100% mortgage insurance. On average its the same as the other $168 billion that is owed by Kiwis to Aus Banks.
On 27 May 2010 at 1:02 pm There's always a twist said:
Mr Callaghan,

What is the likelihood the insurer is unable to cover any losses? Especially in a downward a trending market?
Commenting is closed


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