Thinktank closes $750m residential mortgage-backed securitisation issue

The specialist commercial and residential property lender, Thinktank, has successfully closed its fourth residential mortgage-backed securitisation (RMBS) issue for A$750 million after investor interest enabled the deal to be upsized from A$500 million at launch.

This most recent transaction, being Thinktank’s twelfth securitisation overall, takes the total of bonds to A$5.5billion, confirming the company’s reputation as a prominent capital markets issuer and mortgage secured lender to Australian self-employed and SME borrowers.

Thinktank CEO Jonathan Street said, “The participation of 20 institutional investors, split between Australia (58%) and offshore (42%) for this A$750 million deal, illustrates continuing strong support for the company’s dual mortgage-backed wholesale funding programs amid challenging conditions.”

The transaction was assigned final ratings from both Standard and Poors (S&P) and Fitch. The A$600m Class A1 Notes and the A$87.75m Class A2 Notes are rated AAA(sf). The A$20.25m Class B Notes, the A$16.12m Class C Notes, the A$11.25m Class D Notes, the A$6.75m Class E Notes, the A$4.13m Class F Notes and the A$3.75m Class G Notes carried S&P assigned ratings of AA(sf), A(sf), BBB(sf), BB(sf), B(sf) and NR(sf) respectively.

Pricing was fully disclosed across the structure with the Class A1 Notes being set at a margin of +1.65% above the 30-Day Bank Bill Swap Rate while the Class A2 Notes tightened from initial price guidance of +2.50% to +2.40% on the back of particularly strong investor demand.

Real money investors represented 50% of the total amount issued while banks accounted for the balance. The transaction was 1.43x over-subscribed representing bids amounting to just under A$1.1 billion. The pool of 1003 first mortgage loans with an average size of A$744,756 while 89.7% of properties were in major metropolitan areas with 11% in highly urbanised non-metro locations.

Street commented, “While the continuing impacts of higher interest rates are being progressively felt throughout the economy and the demand for credit has certainly softened, our outlook for credit performance remains cautiously positive at this time and we are keen to continue our support for SME and self-employed borrowers seeking mortgage finance solutions.”

New South Wales was the most prominent borrower state with 47.4% followed by Victoria with 37.88% and Queensland at 9.5%. Self-managed superannuation fund (SMSF) borrowers accounted for 8.1% of loans while the weighted average Loan to Valuation Ratio (LVR) was 69.8% with 39.7% of loans extended to investors and the balance to owner-occupiers. Most loans were on principal and interest repayment at 81.7% with only 18.3% commencing under an interest only period before converting to principal and interest.

With 200 employees, Thinktank is a specialist commercial, residential and SMSF property finance lender. The company commenced operations in 2006 and currently has offices located in Sydney, Melbourne, Brisbane and Perth. To date, Thinktank has advanced more than A$8 billion in mortgage finance to Australian small to medium sized businesses, self-employed and individual borrowers.