Australian Finance Group prices $500 million RMBS issue

Australian Finance Group Ltd (ASX:AFG) has successfully priced its $500 million AFG 2019-2 Trust Residential Mortgage Backed Securities (RMBS) issue after once again receiving strong oversubscription. This is the second RMBS issue this year for AFG.

AFG Chief Executive Officer David Bailey welcomed the issue. “Building on the success of the 2019-1 issue earlier this year, we are very pleased to see an increase in domestic and international investor participation. The 2019-2 issue represents the first transaction with a deal roadshow to UK investors and the strong demand across domestic and international investors has allowed the deal to upsize from $350 million to $500 million.

“There is a growing understanding of the unique position AFG holds in the RMBS market and the flow on effect that has on our overall portfolio performance.

“As both an originator and a distributor of mortgages, our experience frames our credit policies and lending practices. Our portfolio, 100% broker introduced, has a track record of outstanding performance.

“On behalf of AFG, I would like to express my thanks to our investors for their strong show of support that has enabled the company to issue $1 billion of paper into the market this year. It is also important to acknowledge our brokers, who have demonstrated confidence in our products and service by recommending them to our clients.”

Details relating to the $500M AFG 2019-2 Trust RMBS transaction are below:

Class Issue Size A$(m) Expected Ratings S&P / Fitch Initial Credit Support Interest Rate Expected WAL
A $450.00 AAAsf/AAAsf 10.00% BBSW + 115 bps 2.7yrs
AB $29.25 AAAsf/NR 4.15% BBSW + 175 bps 4.5yrs
B $8.00 AAsf/NR 2.55% BBSW + 205 bps 4.5yrs
C $6.25 Asf/NR 1.30% BBSW + 250 bps 4.5yrs
D $3.15 BBBsf/NR 0.67% BBSW + 375 bps 4.5yrs
E $1.70 BBsf/NR 0.30% BBSW + 575 bps 4.5yrs
F $1.65 NR/NR undisclosed 5.0yrs

RBA cash rate unchanged at 0.75%

The RBA has decided to leave the official cash rate unchanged at 0.75% as it assesses the impact of its June, July and October cuts.

In making this decision not to drop rates again, the RBA will have considered strong evidence of an improving housing market, supported by rising house prices in most capital cities and particularly in Sydney and Melbourne.

In making the decision to hold rates, the RBA will be keeping a close look on household consumption following lower than expected retails sales in September.

The three previous rate reductions, along with tax cuts, have failed to restore inflation to within its target range of 2 – 3% pa.

If you’d like to have a chat about what today’s news means for you and your finances, please don’t hesitate to?get in touch with an AFG broker.