ASJ Issue 15 (November 2018) by Australian Securitisation Forum ASJ

Incorporating Australian Securitisation & Covered Bonds >> Issue 15 â&#x20AC;˘ 2019

A 360 degree view of Australian securitisation A decade on from the financial crisis and 12 months on from a record issuance year, market participants look to the past and future

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ASJ AUSTRALIAN SECURITISATION JOURNAL

Incorporating Australian Securitisation & Covered Bonds

>> Issue 15 • 2019

ASF MANAGEMENT COMMITTEE Chair Chris Green Deputy Chairs Sarah Hofman David Ziegler Treasurer Heather Baister Chief Executive Officer Chris Dalton asf@securitisation.com.au +61 2 8243 3900 www.securitisation.com.au

ASJ PUBLISHED BY

CONTENTS

2 WELCOME 6 FLYP 9 NEW ASSETS 12 TRUSTEE ROLE 14 NZ SECURITISATION 18 NZ ROUNDTABLE 22 GLOBAL IBORS 24 FINTECH OUTLOOK 26 GREEN ROOTS 28 HOLISTIC VIEW 30 US LAW 32 ROUNDTABLE 45 ASF MEMBER PROFILES 53 ASF ISSUER PROFILES

Chris Dalton, chief executive, Australian Securitisation Forum, talks about the ASF’s work this year.

Checking in with efforts by the ASF’s Future Leaders and Young Professionals subcommittee to demystify securitisation for today’s students. RBC Capital Markets has a look at collateral diversity in the US and what it could mean for Australia in the long term. Insights from Perpetual Corporate Trust on the true value of a vital but less understood aspect of the market. The market is developing on its own, but a regulatory push could be a game-changer.

Market participants find new optimism about a clearing path to bank issuance.

Commonwealth Bank of Australia tackles the big issue of international reference-rate reform.

www.kanganews.com +61 2 8256 5555 Chief Executive Samantha Swiss sswiss@kanganews.com Head of Content and Editor Laurence Davison ldavison@kanganews.com Senior Content Manager and Deputy Editor Helen Craig hcraig@kanganews.com Staff Writer Matthew Zaunmayr mzaunmayr@kanganews.com Head of Commercial Jeremy Masters jmasters@kanganews.com Sales Support Officer Yazzy McGuid ymcguid@kanganews.com Design Consultants Hobra Design www.hobradesign.com ISSN 1839-9886 (print) ISSN 2207-9025 (online) Printed in Australia by Spotpress.

CONTENTS OF THIS MAGAZINE IN ANY FORM IS PROHIBITED WITHOUT THE PRIOR CONSENT OF THE COPYRIGHT HOLDER.

The rise of technology-driven lenders and their future prospects, according to Westpac Institutional Bank.

Green securitisation is becoming a better established and more significant part of the market, says National Australia Bank. ANZ shares a perspective on the decade since the financial crisis and considers lessons for the future.

The annual update from Mayer Brown on US regulatory developments that might have consequences for Australian securitisers, and how issuers can respond. Australian securitisation industry leaders reflect on market development and highlight their focus areas for the years ahead.

COLUMN

FROM THE CHIEF EXECUTIVE Welcome to the annual Australian Securitisation Forum (ASF) conference edition of the ASJ.

global investors, which has increased participation not only in existing securitisation programmes but also in many new transactions. Although the New Zealand securitisation market has been much quieter in 2018 than 2017 – also its busiest year of issuance since the financial crisis – the RMBS asset class has gained new momentum with Avanti Finance’s inaugural issue of prime and nonconforming RMBS. Australia’s covered-bond market continues to be well supported by investors with larger authorised deposit-taking institutions (ADIs) using covered bonds as part of their annual funding programmes. In 2018, ING Bank Australia became the latest Australian bank to establish a covered-bond programme.

REGULATORY AND POLICY MATTERS

CHRIS DALTON

CEO, AUSTRALIAN SECURITISATION FORUM

t is pleasing to note that primary-market activity in the Australian securitisation market has continued to be strong throughout 2018. While the volume issued in 2018 falls short of that achieved in 2017, surpassing last year’s supply was always going to be a challenge given 2017 was a postcrisis record. Residential mortgage-backed securities (RMBS) comprises the bulk of issuance in 2018. While there have been transactions from all issuer sectors, the nonbank sector has contributed the majority of 2018 deal flow with placements backed by prime and nonconforming collateral. Issuance in the smaller asset-backed securities (ABS) market has been diverse, with underlying collateral including auto loans, credit cards and SME receivables. There continues to be robust demand for Australian collateral from domestic and

2 · Australian Securitisation Journal | Issue 15_2019

Several notable changes were introduced in 2018 that are significant to the Australian securitisation market. Following the Basel Committee finalising its Basel III capital framework in December 2017, the Australian Prudential Regulation Authority (APRA) issued a discussion paper in February 2018 proposing revisions to the capital framework for ADIs – subject to the APS 120 approaches for calculating credit risk. Although the discussion paper is indicative, APRA has announced that its proposed new capital framework will result in an increase in risk weightings for residential mortgage exposures, particularly for investment, interest-only, high loan-to-value ratio and other nonstandard residential mortgages. In March 2018, Australia’s Banking Act was amended to provide APRA with new reserve powers to make rules in relation to the lending activities of non-ADI lenders only if such activities are materially contributing to risks of instability in the Australian financial system. Non-ADIs caught by these new powers will also have monthly or annual reporting obligations to APRA, taking effect from March 2019. The Productivity Commission released its final report on Competition in the Australian Financial System in August 2018. Although the commission acknowledged that financial services are regulated to ensure financial-system stability and to protect consumers, it concluded that the system tends to favour stability at the expense of competition. Some of the key issues contributing to the lack of competition include the tight hold on the retail banking sector by the four major banks, the number and complexity of financial products in the market, and the barriers to market entry for smaller to medium enterprises contributed to by overly burdensome prudential requirements and the broader regulatory architecture.

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COLUMN

nonmembers. This programme includes the following courses On 18 September, the ASF hosted its third Tokyo investor in Australia: seminar at the Australian embassy, reaching a capacity of 140 ◆ Securitisation Fundamentals registrants. Approximately 120 investors – including Japanese ◆ Securitisation Professionals banks, life-insurance companies and asset-management firms ◆ Securitisation Applied – attended with 18 Australian representatives including bank ◆ Securitisation Trust Management and nonbank issuers. In addition, a tailored New Zealand Securitisation There was considerable interest in the Australian housing Fundamentals course is now offered in New Zealand, which market. Despite the adverse headlines on housing that specifically incorporates New Zealand legal and regulatory offshore investors are often exposed to, it was pleasing to note principles and ABS transaction studies. In 2019, the ASF will that the Japanese investor base remains highly engaged with introduce a tailored two-day New Zealand Securitisation the Australian RMBS and ABS markets. Given the success of Professionals course, as the next step from the New Zealand this event, the ASF will consider holding it again in 2019. Fundamentals programme. The 2018 ASF conference The list of dates and marks the end of Chris Green’s locations for courses the ASF term as chair of the ASF. Chris will be running in H1 2019 can has been a member of the ASF’s “While the volume issued in 2018 falls be found on p63 and p64. governing body, the National short of that achieved in 2017, surpassing ASF membership remains Committee, since 2009. He has last year’s supply was always going to be strong in 2018 with the list served as treasurer, deputy a challenge given 2017 was a post-crisis running to a total of 121 chair and most recently as chair record.” Australian and New Zealand since 2015. market participants. We Chris’ tenure as chair has welcome new members witnessed further growth and including Athena Mortgage, maturity of the Australian Bentham Asset Management, Beyond Bank, Dentons, GLAS, and New Zealand securitisation markets. He has provided Gryphon Capital Investments, Hall Advisory, KPMG, Manning significant support to the advancement of the securitisation Asset Management, Melbourne Home Loans, StockCo markets in Australia and New Zealand at an individual level (Australia), Thorn Group Financial Services, Trustees Executors and in his role as executive general manager at Perpetual (NZ) and 86400. Corporate Trust (Perpetual). We congratulate Chris on his The Future Leaders and Young Professionals (FLYP) appointment, in October 2018, to the position of chief subcommittee has achieved significant progress with its financial officer of Perpetual. university outreach programme in 2018, having delivered Chris has been a key advocate for the ASF’s Women seven presentations to postgraduate business schools in in Securitisation initiative and the establishment of the both Sydney and Melbourne. The feedback from lecturers New Zealand market subcommittee. He has also invested and students has been most significant time in promoting favourable and more details the securitisation industry to of the FLYP initiative can be policymakers and international found on p6. investors, to build increased “Despite the adverse headlines on The ASF, with the support sustainable demand for housing that offshore investors are often of its New Zealand market Australian and New Zealand exposed to, it was pleasing to note that subcommittee, continues RMBS and ABS. Chris’ insightful the Japanese investor base remains highly to engage with the Reserve stewardship and contribution to engaged with the Australian RMBS and Bank of New Zealand (RBNZ) the ASF will be missed. in relation to the RBNZ’s In 2019, the ASF will ABS markets.” proposal to establish a continue to support the standardised residential securitisation market by mortgage collateral providing the industry with standard for banks’ liquiditya forum to discuss and form management purposes (see p14). The RBNZ continues to industry positions on regulatory, policy and market matters. work with the industry to develop a collateral standard The ASF is committed to promoting the securitisation and associated reporting infrastructure, which is intended market to investors and policymakers and to advancing to increase interest and investment in securitisation as a the professional standards of the industry through its funding alternative in New Zealand. comprehensive suite of educational courses. ■ 4 · Australian Securitisation Journal | Issue 15_2019

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COLUMN

SPREADING THE WORD TO THE NEXT GENERATION Have you ever tried to explain securitisation with just your voice and bare hands? One evening behind the undulating façade of the Frank Gehry-designed UTS Business School in a 60-seat oval auditorium, I did just that – on behalf of the Australian Securitisation Forum (ASF)’s Future Leaders and Young Professionals (FLYP) subcommittee. BY MONICA STEPHENS-SALIBA

eedless to say, it’s a complex topic to bring to young minds. A temporary loss of technology that evening meant I could not leave it to Ryan Gosling to explain it, either. Our presentation was (meant to be) complemented with a short clip of the ‘Jenga’ scene from the 2015 film adaptation of The Big Short in which Ryan Gosling elegantly demonstrates residential mortgage-backed securities (RMBS) tranching with the use of a jenga stack. Breaking down securitisation into palatable pieces is precisely the challenge the ASF’s FLYP subcommittee has embarked on. FLYP is made up of a wide array of securitisers from the industry and has now delivered 12 successful presentations to universities in Sydney and Melbourne. Joshua Knuckey, associate director at Macquarie Bank in Sydney and chairman of FLYP, says the primary objective of the university outreach programme is to demystify what some have labelled as the “dark arts” of finance and help students identify logical pathways into institutional finance roles. “The specialist nature of our industry means it is seldom the subject of much attention at universities – it is often simply a postscript to the tales of fiscal carnage from the global financial crisis with little explanation of the industry

6 · Australian Securitisation Journal | Issue 15_2019

and the excellent professional opportunities it presents,” Knuckey says. He adds: “The case can be made that securitisation was a convenient scapegoat, copping criticism after criticism for its role in the global financial crisis without due consideration of the Australian market, which demonstrates a lack of understanding of the process and its often-overlooked benefits.” In addition to making students aware of opportunities, FLYP’s coordinated programme also provides the industry with a candid voice to correct some of the common misunderstandings – thereby promoting a positive reputation for the industry. Dr Harry Scheule, professor at UTS Business School, acknowledges securitsation gets a light touch in universities: “Securitisation is one example that is not fully recognised in our teaching despite the global importance for risk transfer and bank funding. Securitisation is also an important instrument to support the development of financial markets in Asia Pacific and improve diversification.” Scheule understands just how valuable it is for students to connect classroom teaching with the real world. “In our banking classes, we are moving from knowledge- to skills-based teaching and the guest lectures are an integral part of this. The guest lectures are carefully sourced to match subject content and other integrated learning approaches.” Scheule has taken a highly practical approach to his teaching, including introducing a bank simulation study to his classes. This is a software game where students are appointed into different executive roles within a virtual bank and, over five weeks, tackle different scenarios and tasks in managing the bank. The varying professional backgrounds of the FLYP committee members has allowed students to benefit from many perspectives in these talks – from a major bank’s funding perspective to that of a loan originator that relies more heavily on securitisation markets. One of my peers in the committee also brings to the table a wealth of knowledge on the emerging Asian markets in this segment. This is hugely beneficial in the context of the internationalisation of both the Australian market and its further-education institutions. Dr Nathan Gooley, of University of Sydney Business School, comments that these sessions enhance the students’ educational experience as they get a glimpse into the everyday life of the speaker. “Having representatives from the ASF is not only a wonderful way for students to learn about securitisation in Australia but also introduces them to various professions and career opportunities in the field. University of Sydney students left the experience with more knowledge than they came in with. I believe the process helps students build important connections between what they are learning and the real world of securitisation in Australia.” ■

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To discuss how membership can work for you, contact Chris Dalton. cdalton@securitisation.com.au +61 403 584 600

COPUBLISHED COMMENTARY

COLLATERAL DIVERSITY AND THE AUSTRALIAN MARKET The Australian securitisation market is in the sights of RBC Capital Markets (RBC), which has already made its mark since establishing an on-the-ground presence barely a year ago. The bank has global expertise in securitisation across the board, but one area of particular interest is the nontraditional-asset market – which has enjoyed notable growth in the US and, RBC believes, might be primed for longterm growth in Australia. The bank’s global team shares a perspective with ASJ.

RBC is a relatively new entrant to the Australian securitisation space. First of all, can you share some insights into the bank’s recent decision to expand into the Australian ABS market? RBC already has an established global securitisation business with current warehouse commitments in excess of US$30 billion across assets including personal loans, trade receivables, credit cards, auto and equipment loans and leases, fleet financing and residential mortgages. In addition to onbalance-sheet warehouse and conduit financing, we provide term-transaction structuring expertise with a distribution platform that spans North America, Europe and Asia. With support from our successful capital-markets business in North America – which consistently holds top-five standings in league tables – Australia was the logical next

step to replicate the franchise. This is especially so given the similarities between the Canadian and Australian economies, including the housing markets and established mortgage- and asset-backed markets. Our Australian securitisation business was established in October 2017. In just 12 months, it is at a point where it is successfully combining global structuring expertise, warehouse funding capabilities and distribution with an experienced local team to offer clients innovative funding solutions while building long-term, mutually beneficial relationships. We find we can leverage local distribution capabilities through our Australian sales team while coordinating global coverage across the US, Canada, Europe and Asia including Japan. This is complemented by derivative solutions, fixedincome capabilities, corporate lending and investment-banking services locally and offshore.

What sectors does RBC plan to finance in Australia? We intend to replicate the success achieved offshore. The global RBC business is successfully funding a range of asset classes including autos, equipment, consumer finance, fleet and residential mortgages. Our Australian expansion also extends on our proven expertise in structuring and execution across nontraditional assets gained in North America and Europe to new issuers in the local Australian market. We believe having our global team focused on nontraditional assets supported by jurisdictional experts on the ground in Australia differentiates us from many of our peers. This approach enables us to leverage our existing expertise and provide first-class structuring solutions to our Australian securitisation clients.

The Australian securitisation market is, as we all know, dominated by residential mortgagebacked securities issuance. What is happening globally with nontraditional assets? With the market for traditional asset-backed securities (ABS) well-established, we see a growing opportunity to connect borrowers, lenders and investors with nontraditional ABS. Beyond this, increased supply across new and programmatic issuers has been met by an expanded credit-risk

“AS IS THE TRUE AUSTRALIAN WAY, THERE IS A HEALTHY DEGREE OF SKEPTICISM IN THE MARKET REGARDING THE LIKELY BREADTH AND DEPTH OF AN ABS MARKET WHICH, UNTIL MORE RECENTLY, WAS NASCENT AT BEST. WE SEE SOME RECENT DYNAMICS THAT POINT TO A MORE ROBUST GROWTH PROFILE.”

COPUBLISHED COMMENTARY

US N O N T RA D I T IO N A L S E C U R IT IS A T IO N IS S UAN CE Consumer loans

Whole business

Non-captive equipment

Cell towers

Aircraft Timeshare

Rental car

Rail car

Container

Wireless spectrum

Wireless handset

Other*

50 8.3

VOLUME (US$BN)

40 8.3

7.7 1

1.8 2.2 2.4 3.3 3.7

2.6 3.5

0.5

7.2

0.7

2.7 2.6 1.5 3.3

0.1

4.2

4 2.8 0.6 1.9 2.4 0.9 4.0 6.5 7.4

8.5 2.8 3.9 2.4 0.7 2.4 3.0 2.4 4.7 5.6 5.1

2.8

7.3

8.6

2015

2016

12.3

11.1

2017

2018 YTD

0 * "Other" includes PACE, ratepayer-backed, solar and miscellaneous securitisations. S O URCE: RBC CAPITAL M ARKETS OCTOBER 2018

appetite from ABS investors. In the US, for example – where most nontraditional ABS has been issued – nontraditional volume is up nearly 30 per cent year on year in 2018 (see chart), versus a 10 per cent increase for the broader US ABS market. Investor appetite for nontraditional ABS is being met with a growing range of asset classes. Aircraft has seen tremendous growth from established and new lessors underpinned by an increasing population of passengers in Asia. Cell towers and data centres are working as established tower companies access more low-cost funding and data centres tap the ABS market for the first time. Small-ticket equipment collateral is growing as SMEs across the board ramp up their market engagement. And wireless-spectrum collateral is more visible as Sprint returned to the market before its announced merger with T-Mobile. The growth and diversity across the nontraditional asset spectrum, coupled with RBC’s track record in developing funding solutions that meet our clients’ objectives, is why clients want to work with a trusted and experienced partner like RBC.

Other than the growth in volume, what do you see as the most significant recent development in the nontraditional market? We see remarkable global development in handset ABS – so much so that in a relatively short period of time the sector is expected to grow to a scale that will place it in line with many on-the-run assets such as credit cards and prime autos. 10 · Australian Securitisation Journal | Issue 15_2019

Wireless issuers in the US and Europe have recently shifted their product offering away from long-term service contracts – meaning ones that subsidise the cost of the handset – to a model that requires customers to purchase a device, often with the wireless carrier offering a financing option for the device. This shift in the product offering has created a high-quality securitisation asset. RBC has been a leader in bringing handset clients to market, establishing a number of programmes for issuers in the US and Europe. In the early stages of handset finance, many issuers were motivated by the prospect of achieving off-balance-sheet financing. However, as funding needs grew more quickly than many had originally forecast, programmes have had to evolve to enjoy the broader securitisation value proposition including access to diversified funding markets, attractive relative cost of funds and an ability to scale over time. While the majority of handset financing has occurred in the bank market to date – as is typical in the early stage of new asset classes – we expect to see capital-markets issuance in this sector grow over the near-to-medium term, especially in light of the success Verizon has enjoyed in the US capital markets. Since Verizon’s first capital-markets ABS two years ago, spreads have quickly tightened to be in line with prime auto and credit-card issuance. This reflects investor acceptance and strong liquidity.

What about the risk profile of nontraditional assets? Are we talking about a sector that inherently carries a higher degree of risk than the types of securitisation collateral we typically see in Australia? Not necessarily. There is a tendency to assume that nontraditional ABS structures are more complicated and more risky than traditional ABS. However, often the risks associated with nontraditional ABS demonstrate lower correlation with the established consumer ABS asset classes such as credit cards, autos and student loans, offering investors a more balanced portfolio with greater yield opportunities. It is true that the risk profile will vary considerably across asset classes, which is why the key to creating a balanced risk-reward proposition comes through working with a team that brings an established track record of structuring nontraditional securitisation exposures, like RBC. RBC is a proven market leader when risks have been most acute, as is evidenced in our commitment to the shippingcontainer sector. This asset class has a high correlation with macroeconomic conditions. Roughly half the world’s global shipping-container fleet is leased to shipping lines. In large part, the global securitisation market provides lessees with the requisite funding to purchase their container fleets. In turn, ABS investors generally look to the operating-lease cash flows and ultimate disposition proceeds of the containers

to repay the debt. When the industry recently experienced a cyclical downturn, involving sustained pressure on lease rates and disposition values and which was further exaggerated by the simultaneous insolvency of a large shipping line, RBC provided material bank financing to our clients to ensure certainty of financing during a time when the broader market was assessing the temporary change in fundamentals. Given the relative strength of the financing structures in place, debt investors were able to emerge from the cycle avoiding any losses. We also worked with investors, issuers and rating agencies further to enhance debt structures – leading to record capital-markets issuance and enabling the sector to emerge from the downturn stronger than before. RBC was – and remains – the top “lead-left” underwriter for container ABS, structuring four of the six largest transactions.

The big question for market participants in Australia is whether nontraditional securitisation can and will work here. We often hear the suggestion that if it was going to happen it would have done so by now. What is your view on this? As is the true Australian way, there is a healthy degree of skepticism in the market regarding the likely breadth and depth of an ABS market which, until more recently, was nascent at best. We believe some recent market dynamics point to a more robust growth profile, albeit one which is for the time being typically concentrated in the more traditional asset classes such as autos, consumer finance, SME lending and equipment assets. These dynamics include recent M&A activity with Latitude Finance Australia (Latitude) and Element acquiring consumerfinance and fleet portfolios from GE Capital, existing lenders and issuers diversifying into adjacent asset classes beyond residential mortgage loans, the firepower of the larger privateequity firms to support growth, and the emergence of fintech lenders. As these entities become more mature, build track record and develop more sustainable and robust models, securitisation should become a critical part of their capital structures. As critical mass is achieved and performance

demonstrated, we expect to see new issuers come to market with transactions backed by a broader range of asset classes. This said, we don’t see the Australian market replicating the variety of nontraditional asset classes on the same scale as the US. Each market in which RBC operates is unique and, while we see opportunities to leverage our global success in nontraditional ABS in Australia, we are aware of the market’s particular idiosyncrasies. Beyond this, a number of supply-side conditions must exist for nontraditional markets to flourish, including multiple entities operating in the space, the potential for critical mass in origination volume, and granularity and homogeneity of the assets. With this in mind, handset securitisation certainly has applicability, albeit with regional nuances. The US experience has achieved the issuer objectives of lower funding costs, funding diversification and accounting derecognition among others. The renewables sector is also likely to offer further supply as the products represent cost-effective energy solutions, while the technology continues to improve and costs reduce. This is also facilitated by government initiatives and collaboration with organisations like the Clean Energy Finance Corporation. The Australian investor market has continued to demonstrate support for new issuers and assets types. In 2017, Latitude successfully issued three public term transactions as a new entrant, two backed by sales finance and credit cards and one by personal loans. Furthermore, FlexiGroup has been successful in the renewables space and has incorporated green bonds supported by solar assets into its securitisation programme. RBC expects in the coming years the market will continue to see new issuers emerging, including from the fintech space, as well as an increase in the volume of green tranches and renewable assets. For assets that are more heterogeneous, bespoke financing solutions have tended to be private placements held on bank balance sheets, although US experience shows markets can develop with adequate investor education and engagement. RBC considers the motivations of its clients and offers innovative funding solutions to meet their objectives, including funding diversity, deconsolidation, derecognition and funding costs. ■

This article is for informational purposes only. It is not intended as an offer or solicitation for the purchase or sale of any financial instrument, investment product or service. The information and analyses contained herein have been compiled from, or based upon, sources believed to be reliable, but no representation or warranty, express or implied, is made by RBC Capital Markets or any of its businesses or representatives, as to its accuracy, completeness or correctness. This article is intended for sophisticated investors and may not be suitable for all individuals. It represents RBC Capital Markets’ views as at the date of publication, which are subject to change at any time. Readers should conduct independent due diligence and not rely on any credit rating or other opinions contained within this document when making an investment decision. Canada, the US, and most countries throughout the world have their own laws regulating the types of securities and other investment products which may be offered to their residents, as well as the process for doing so. To the fullest extent permitted by law, neither RBC Capital Markets nor any of its businesses or representatives, accepts any liability whatsoever arising from, or relating to, any use of this article. This article is not, and under no circumstances should be construed as, an offer to sell a security or a solicitation to act as a securities broker or dealer in any jurisdiction by any person or company that is not legally permitted to carry on the business of securities broker or dealer in that jurisdiction. No matter contained in this article may be reproduced or copied by any means without the prior written consent of RBC Capital Markets. This article has been distributed in Australia by Royal Bank of Canada (ARBN 076 940 880, AFSL 246521).

COPUBLISHED COMMENTARY

THE (UN)CHANGING ROLE OF THE TRUSTEE “Calm seas never made a good sailor,” as the old adage goes. The same could be said of trustees: their real value shines through when the storm clouds loom – in times of financial stress. Perpetual Corporate Trust (Perpetual) shares a real-world example.

hen times are good, volatility is low, credit is easy and payments are flowing, you might think less about a trustee’s size, experience and skills, and more about its cost. But when markets turn you realise the value of sticking with quality. A trustee must be impartial and will be evaluated for its ability to make decisions that are legally correct and accurate, while allowing for the complexity of a given default scenario. Every deal is different and so is every breach. When noncompliance is identified, there are legal obligations but there is also a whole range of difficult choices to make. This is when a trustee’s experience and knowledge will come to the forefront. The trustee will notify security holders, offer expert advice and dive into all the issues in search of a resolution that is both fair and legal.

“You want your trustee to have the confidence of the market – and while that means it may not necessarily give you the answers you want, you have to be wise enough and strong enough to accept that. If the trustee was to bow to any one stakeholder it loses its core competency – and that’s not helpful.” ISSUER COMMENT, PERPETUAL TRUSTEE RESEARCH STUDY 2018 12 · Australian Securitisation Journal | Issue 15_2019

DECISION TIME Difficult decisions can be daunting, but they do not have to be. An experienced trustee team can help investors decide how to engage with issuers, trigger events or pursue legal action. The trustee can meet with the servicer to negotiate options in the face of a potential default. In a worst-case scenario the trustee can replace the servicer. Nuance and tact are important here. This is not a battle – it is more like a ship, and all parties are on board together. Nobody wants to see the ship go down, and the trustee is best equipped to move everyone aboard towards a safe harbour. While all situations are different, a trustee will always act in the interests of the secured creditors it represents. A core element of keeping the ship afloat is understanding the varied motivations of the parties involved. The skill set here goes beyond administration of a trust. It requires commercial smarts to appreciate the goals of the other parties as well as legal acumen and experience to foresee legal outcomes and complications. By design, the trustee will usually hold a stronger negotiating position than individual bondholders as it represents all the investors. When it comes to making the bold decisions, a trustee needs to have a strong balance sheet and corporate support to ensure the ship makes it to the safe harbour. Here is one example of how Perpetual navigated a specific storm.

“A trustee is someone who is independent and fair while also being someone who commercially understands the situation. The trustee can balance the commercial and legal aspects.” ISSUER COMMENT, PERPETUAL TRUSTEE RESEARCH STUDY 2018

THE MAHOGANY CASE A little over a decade ago, Mahogany Capital (Mahogany) issued notes the proceeds of which were used to invest in another series of credit-linked notes. The issuer of these subsequent notes then purchased collateral made up of debt securities from banks rated double-A-minus or higher, while also entering a swap arrangement with the ill-fated Lehman Brothers (Lehman). This arrangement required Lehman to make regular interest payments to the issuer, which in turn would flow to Mahogany noteholders. A “flip clause” was included to protect the issuer from a Lehman default. We do not need to go into the traumatic events of 2008, but suffice to say Lehman stopped making the contracted interest payments. Payments were due to noteholders. But Mahogany was facing a further challenge as it was being argued that the flip clause – which would give it access to the collateral pool which

would support repayment to noteholders – was invalid under US law. Perpetual disagreed and acted on behalf of the noteholders by taking legal action in the High Court of England and Wales. The court found in favour of the noteholders and confirmed the enforceability of the flip clause. Lehman appealed the case but lost. The process continued with a US court deeming the flip clause unenforceable. There were more appeals and more decisions until, finally, Perpetual managed to reach an agreement with Lehman. As a result of Perpetual’s action, the noteholders – which included charities, local councils and more than 1,000 retail investors from Australia, New Zealand and Papua New Guinea – received up to 85 cents in the dollar of principal invested in Mahogany Series 1 and 69 cents in the dollar of principal invested in Mahogany Series 2. This was a complex and lengthy legal battle in which Perpetual was able to us its expertise and financial resources, in this case amounting to more than A$1 million, to cover the cost of litigation.

WHEN THE TIDE GOES OUT Your choice of trustee matters. A good trustee will be well resourced with experienced staff, a strong balance sheet, relevant industry expertise and a willingness to use its resources and financial muscle to support the interests of secured investors. Contemplating financial markets as we reach the 10th anniversary of the global financial crisis, it pays market participants to remember the value of having a quality trustee like Perpetual by your side. ■ Perpetual Corporate Trust services are provided by Perpetual Corporate Trust Limited ABN 99 000 341 533 AFSL 392673, Perpetual Trustee Company Limited ABN 42 000 001 007, AFSL 236643, Perpetual Limited ABN 86 0000 431 827 and its subsidiaries. Perpetual Limited and certain of its subsidiaries act as Authorised Representatives of Perpetual Trustee Company Limited. Data and analytics services are provided by Perpetual Digital Pty Ltd ABN 62 626 891 978. This publication contains general information only and is not intended to provide you with financial advice.

EVERY PART OF YOUR BUSINESS COVERED. For more than three decades, Perpetual Corporate Trust has been serving the securitisation industry. We link issuers, regulators and the investment community. We oversee transactions end-to-end, provide impartial oversight, balance the needs of all parties and protect the interests of investors. As the industry and the environment changes, we’re changing too. Our investment in people, process improvement and technology give our stakeholders confidence that our obligations can be fulfilled each and every time.

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FEATURE

UPDATE ON SECURITISATION IN NEW ZEALAND While there was a vibrant securitisation market in New Zealand prior to the financial crisis with a number of regular residential mortgage-backed securities (RMBS) issuers, issuance ceased in 2007 and the market has been slow to reopen since. However, there has recently been increased activity in the New Zealand securitisation market, with the highest level of issuance to date in 2017-18. BY DEEMPLE BUDHIA AND SIMON O’CONNELL

otably, all recent issuers have been nonbank originators while issuance has been spread across a range of asset classes and from first-time and repeat issuers. Excluding bank internal RMBS and covered-bond programmes, there were seven securitisation transactions in New Zealand in 2017-18, totalling NZ$1.3 billion (US$851.4 million), which represents almost half the total issuance over the last 10 years (see chart). NE W Z E A L A N D S E C U R IT IS AT IO N IS S U A NC E V OL UME ABS

RMBS

1,000 900 800

250

VOLUME (NZ$M)

700 600

150

500 400

653

300 483

200 100

200

0 2010

2011

100

2012

2013

200

398

150 2014

2015

S O U RCE: BL OOM BERG, WESTPAC I N STI TUTI ON AL BAN K OCTOBER 2018

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2016

2017

2018 YTD

FlexiGroup – through its Q Card programme – MTF and Resimac have now made a name for themselves as the most frequent repeat issuers in New Zealand. These three nonbank originators represent three distinct asset classes: credit cards, auto receivables and residential mortgages. Term securitisations over recent years have been split almost equally between credit card asset-backed securities (ABS), auto ABS and RMBS. Issuance in 2017 commenced in July with Eclipx’s inaugural New Zealand transaction – a NZ$224 million securitisation of operating leases originated through the issuer’s fleet business. The transaction was well bid and featured participation from domestic and offshore accounts. Issuance continued over each of the next four months, with multiple transactions coming to market including MTF, Resimac and Q Card – the latter coming to the market twice. Avanti Finance (Avanti), another nonbank mortgage originator, entered the RMBS market for the first time, in June 2018, with a NZ$200 million transaction backed by a mixed pool of prime and nonconforming loans. The transaction was well received, being oversubscribed even after being upsized by NZ$50 million. In September, Mark Mountcastle, chief executive at Avanti in Auckland, told KangaNews: “RMBS issuance closed the circle for us in proving the concept of a viable nonbank market in New Zealand based on an effective service proposition. The deal portfolio was a mix of prime and nonprime mortgages but the outcome is we have been able to produce an investable security.”

RBNZ SECURITISATION PROPOSAL Bank internal RMBS and covered-bond programmes make up another important part of the New Zealand securitisation market. However, local banks and investors have not historically been engaged with each other on term securitisation. Issuance under covered-bond programmes is generally to offshore investors and internal RMBS is retained by the originating bank as collateral for liquidity and repo purposes. Things might be set to change, though. In the view of the Reserve Bank of New Zealand (RBNZ), a bank’s ability to hold “nonmarketable” internal RMBS notes has reduced the incentive for issuers to develop liquid securities or acquire other types of liquid assets.1 In November 2017, the reserve bank released an initial consultation paper which reviewed, among other things, internal RMBS and proposed a new type of instrument that may be used as collateral. This is the residential mortgage obligation (RMO). The consultation paper highlights that the RMO is intended to be a high-quality and liquid instrument. Among other requirements, the reserve bank is suggesting the RMO 1 See paragraph 18, part A of the RBNZ consultation paper.

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FEATURE

New Zealand market subcommittee SIMON O’CONNELL, DIRECTOR, CORPORATE AND STRUCTURED FINANCE AT WESTPAC INSTITUTIONAL BANK IN AUCKLAND, AND DEEMPLE BUDHIA, PARTNER AT RUSSELL MCVEAGH IN AUCKLAND, ARE MEMBERS OF THE NEW ZEALAND MARKET SUBCOMMITTEE OF THE AUSTRALIAN SECURITISATION FORUM (ASF). The New Zealand subcommitee was established in 2015 as an advocacy group for securitisation in New Zealand. It aims to represent the interests of all ASF members who participate in the New Zealand securitisation and covered-bond market regardless of domicile by: • Building productive relationships with New Zealand government ministers, members of parliament and government departments and agencies that have responsibility for, and influence policy in, New Zealand’s securitisation and covered-bond markets. • Providing submissions and input into policy and regulatory direction

and law reform affecting the securitisation and covered-bond markets. • Identifying areas of New Zealand’s regulatory environment that could be changed to allow for the more efficient and effective operation of securitisation and covered-bond issuance and investment. • Recommending best practices that will ensure efficient, effective and transparent operation of the New Zealand securitisation and coveredbond markets. • Maintaining a current understanding of Australian market practice to ensure, wherever relevant, consistency of approach in

should have a prescriptive capital structure, eligibility criteria and portfolio limits to enhance the credit quality of the underlying pool. The RBNZ states that reasonably standardised instruments, such as the RMO, may assist in developing a liquid market.2 The reserve bank has also been focused on ensuring the RMO is not merely retained by the originator bank and will be marketable to wholesale investors. With this objective in mind, the RBNZ has consulted wholesale investors throughout its process. The initial consultation period closed in March 2018 and the reserve bank has been engaging with market participants to revise the RMO structure since then. We understand that the RBNZ is looking to consult on a revised structure before the end of 2018.

LOOKING AHEAD While the last 15 months has seen increased securitisation issuance in New Zealand, the market will need continued support from existing and new issuers, and from investors, to continue to grow. Since the financial crisis, the New Zealand securitisation market has been dominated by warehouse funding. As existing warehouse securitisations grow, these assets may also contribute to future term issuance. The RMO, once fully 2 See paragraph 44, part A of the RBNZ consultation paper.

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New Zealand and Australia to minimise costs for trans-Tasman securitisation and covered-bond market participants. • Developing and delivering education programmes, either separately in New Zealand or through adaptation from existing ASF programmes and courses. The subcommittee is chaired by Simon O’Connell and comprises market participants including issuers, arrangers, investors, lawyers and trustees. Further information can be found at www.securitisation.com.au/ whatwedo_newzealand_market.

implemented, may also contribute further growth in the New Zealand securitisation market. The early signs are that, after some initial misgivings, bank treasurers are coming round to the potential of the RMO and, indeed, RMBS as a domestic capital-markets instrument (see p18). If more issuance can be expected in the near future, a key question will be who is going to buy the notes on offer. Some New Zealand domestic investors still look to securitisation as the cause of the financial crisis and have shied away from the asset class as a result. Illiquidity is also perceived to be a barrier to entry, notwithstanding the general hold-to-maturity nature of investors already in the market and recent secondary-market trades. In addition, the sporadic nature of domestic issuance to date has not incentivised New Zealand investors to become familiar with securitisation or to invest in analytical skills to evaluate the asset class. Despite these issues, the number of new domestic investors has increased, albeit slowly, along with the bid size of existing investors. In addition, new pockets of interest are opening up from offshore. With the RBNZ’s RMO proposal looking to create a high-quality liquid instrument, it is possible that new investors will be drawn to the securitisation market – including managers of New Zealand’s voluntary long-term savings scheme, KiwiSaver. ■

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ROUNDTABLE

New Zealand gets ready for RMO In September, BNZ and KangaNews hosted their annual New Zealand capital markets roundtable discussion in Auckland. A key topic of conversation was the drive to promote a local bank securitisation market. ASJ is pleased to be able to share this section of the roundtable. PARTICIPANTS ◆ Neil Bradley Treasurer BANK OF NEW ZEALAND ◆ Mike Faville Head of Debt Capital Markets BNZ ◆ Vicky Hyde-Smith Head of New Zealand Fixed Income AMP CAPITAL ◆ Richard Lovell Executive Director, Investments CLEAN ENERGY FINANCE CORPORATION ◆ Fiona McLaughlin Head of Financial Institutions BNZ ◆ David McLeish Head of Fixed Income FISHER FUNDS ◆ John Marsh Head of Investor Sales BNZ ◆ Ian Purdy Head of Direct Property and Infrastructure Investment ACCIDENT COMPENSATION CORPORATION MODERATOR ◆ Laurence Davison Head of Content and Editor KANGANEWS

Davison New Zealand bank securitisation seems

to be getting closer, driven in particular by the Reserve Bank of New Zealand (RBNZ) – but is it something the banks themselves want? ◆ BRADLEY

I think the introduction of the residential mortgage obligation (RMO) by the RBNZ is presenting us with a great opportunity. The banks have used internal securitisation for liquidity purposes – Bank of New Zealand (BNZ) has about NZ$3.5 billion (US$2.3 billion) of this asset class – and the RBNZ is asking us to externalise some of this via the RMO. We are very supportive of this, and we think there will be great primary and secondary opportunities as a result. First, while we don’t necessarily think the overall size of the capital market will increase we do think the makeup of product going into it will change. For example, we do about 25-27 percent of our wholesale funding domestically and it is virtually all senior-unsecured. If and when the RMO comes into play, over time we will issue RMO securities instead of seniorunsecured bonds to some degree. The advantage here is that some of the senior-unsecured bonds are held by retail investors, and if we reduce issuance it will create a gap that can be filled by [other issuers]. We also know there are overseas investors looking for New Zealand dollar assets other than government bonds. An RMO security backed by prime mortgages should be attractive to these investors, particularly those in Asia. All in all, I think the RMO is going to create a fundamental shift in the way banks issue domestically and I think it will happen a lot quicker than we had been expecting.

Davison Why do you think the RMO will cause

a rebalancing of domestic issuance rather than increasing the domestic component outright? ◆ BRADLEY

The domestic real-money market isn’t really looking for more double- and triple-A issuance. Meanwhile, we have a funding programme of around NZ$4 billion a year and we have offshore investors that want predictable supply. In general, this shapes up quite well as one public US dollar deal and one public euro deal each year, with access to the New Zealand market once or twice a year through the secured facility and some private placements. We aren’t talking about increasing our wholesale funding gap. Most of our balance-sheet growth will be funded through

“I THINK THE RMO IS GOING TO CREATE A FUNDAMENTAL SHIFT IN THE WAY BANKS ISSUE DOMESTICALLY AND I THINK IT WILL HAPPEN A LOT QUICKER THAN WE HAD BEEN EXPECTING.” NEIL BRADLEY BANK OF NEW ZEALAND

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The key to smarter funding

moodysanalytics.com/ki

ROUNDTABLE

deposits, because there is a very strong deposit market in New Zealand. What we’re talking about is how we refinance our existing facilities. We won’t just be an active issuer of RMO securities – we will be an investor as well. [However], internal residential mortgage-backed securities (RMBS) doesn’t necessarily cost us a lot of money whereas issuing publicly will come with a cost to the banks. This will be passed on to customers either via higher lending rates or lower deposit rates. It is not a free market.

Davison As well as banks being motivated to

issue the RMO product, the other important factor of course is finding demand for it in the public market. Do local fund managers expect to have natural and early demand for New Zealand bank RMBS as and when the securities start to be issued? ◆ HYDE-SMITH

We would have demand for high-grade structured product in addition to senior issuance, while being mindful of the fact that we already have reasonable exposure to New Zealand residential mortgages via our holdings in senior bank bonds. ◆ MCLEISH We have the capability to look at securitised product – we have been involved in the offshore asset-backed markets before as well as in some of the supply we have seen domestically. It is always on the table for us. ◆ BRADLEY The other positive thing about an active securitisation market is that it brings tier-two lenders into play – it widens access to market beyond the top four banks. It is unlikely that the retail market could become comfortable with the RMO asset class. I see it as a product for professional investors. This said, it might be possible to create a pooled fund that gives retail investors access. ◆ LOVELL Having spent the financial crisis running an RMBS origination business in Australia, I would be quite wary of having the product with retail investors. The times it was tried in Australia were a resounding failure, though New Zealand has the advantage of being a much more developed retail environment for fixed income. ◆ HYDE-SMITH I think it would be a good outcome for New Zealand if we were able to educate a broader pool of investors in the risk profile of these products. A key positive is that, by

going down this path, investors will be motivated to upskill themselves with regard to structured product. Having a standard should also assist with comparability. In this regard it is quite an exciting development.

Marsh It seems that the RMBS market could

be quite a big bang for New Zealand, at least based on the aggregate volume of internal RMBS the banks hold. If we simply extrapolate from this asset class, could we be looking at something like NZ$15-20 billion being termed out into the public market? ◆ BRADLEY

That is the total amount of internal RMBS but I don’t think any of the banks will externalise all of it. I think the four majors would all probably assume they will be able to bring one deal to market each year. Getting to RMO issuance capacity will be a very long journey, and I’d suggest that if we can get to NZ$5 billion total outstanding over the next three years it would represent a pretty significant contribution to the market.

Davison Presumably another challenge to

building issuance volume in bank RMBS from a standing start would be the fact that securitisation structures typically amortise through their life and tend to have a relatively short weighted-average life (WAL)? ◆ BRADLEY

This is the issue: these securities have a very high paydown rate. The RBNZ is looking at options to extend the paydown rate, but we are not yet sure whether or not these options will be taken up. The regulator has a strong desire to develop the capital market with another instrument and there is also support from the banks for this development. I think it will come sooner rather than later and investors will need to be in a position to look at it. ◆ MARSH Assuming the eventual form of the RMO looks something like Australian RMBS, I think we can assume there will be some substitution from bank senior-unsecured issuance into 2.5-3 year WAL, amortising notes with an element of extension risk that doesn’t apply to senior bonds. What we don’t yet know is what the net impact on issuance in the public domain will be, as I am pretty certain

“A KEY POSITIVE IS THAT, BY GOING DOWN THIS PATH, INVESTORS WILL BE MOTIVATED TO UPSKILL THEMSELVES WITH REGARD TO STRUCTURED PRODUCT. HAVING A STANDARD SHOULD ALSO ASSIST WITH COMPARABILITY. IN THIS REGARD IT IS QUITE AN EXCITING DEVELOPMENT.” VICKY HYDE-SMITH AMP CAPITAL

20 · Australian Securitisation Journal | Issue 15_2019

the banks will have substantial cross-holdings of each others’ RMBS. If we are only talking about NZ$5 billion of incremental issuance over 3-5 years, I think this is quite achievable in the context of local market capacity – although it will be coming into a local securitisation market that is currently very small and only has a limited range of investors set up to deal with it. BRADLEY The volume may be increased by the secondary, downstream effect I have described – of second-tier issuers being encouraged to come to market. I think this will happen, but it’s hard to say what the issuance volume will be. This would also take pressure off the banks.

Purdy Is the expectation with New Zealand

RMBS that there will be a high-rated tranche and a residual, equity piece that the issuing bank will retain? ◆ FAVILLE

The framework hasn’t been finalised, but the intention seems to be that the issuing bank will keep the equity piece. ◆ MARSH This is called a “funding-only” RMBS as opposed to a “capital-relief” RMBS. The retained piece would be a small sliver of the total, though. ◆ LOVELL The credit enhancement required for the top triple-A notes in a typical bank RMBS in Australia would typically be something like 5-8 per cent. ◆ FAVILLE At this stage we don’t expect to see a market for that tranche, though it is possible the rules could change over time. ◆ HYDE-SMITH If and when the market becomes more familiar with the product there is no reason why we can’t open the door to broader issuance. ◆ PURDY The reason I ask is that there seems to be a similarity with the infrastructure space. Once a New Zealand publicprivate partnership is built it will typically have a 25-year operating concession with fixed payments and shorter-term financing. It feels like RMBS to me. The interesting point is that New Zealand-based valuers don’t really know how to value the equity piece – so it would be nice to have an active market for RMBS equity notes to look at for pricing guidance. ◆ MARSH This has been an active market in Australia, as a lot of yield-seeking investors are attracted by the 8 or 9 per cent coupons on offer.

◆ LOVELL It

is worthwhile to observe in this context that the Australian market has in recent months generally been four- or five-times oversubscribed for any note rated below single-A, while triple-A tranches are more typically one-and-a-half times oversubscribed. The top tranche is a much bigger outright volume, of course.

Davison It has been suggested that the New

Zealand fixed-income market might be at an inflection point when it comes to supply of high-quality debt assets and, therefore, overall growth. How would market participants assess success when it comes to building a bigger and more liquid market, especially in the context of the development of the securitisation asset class? ◆ MCLAUGHLIN The

success of the RMO process will mean more issuance in this market. A measure of success I am interested in will be if second-tier banks are sufficiently encouraged to issue soon after the first-tier banks. This development would of itself mean a bigger and broader debt capital market in New Zealand. ◆ HYDE-SMITH I agree with Fiona McLaughlin’s point and think structured product will be very useful for this market. More broadly, the key measure of success will be greater issuance to fund infrastructure needs – beyond merely the high-grade space. ◆ MCLEISH We are focused on what we can do to be better. In this context, it means working with arrangers and borrowers who are looking for solutions. It doesn’t have to mean the development of a new high-grade asset class – whether it be the RMO or senior-secured infrastructure funding. Every big market started with its very first transaction and I’d suggest the format adopted in many of those firsts was not the blueprint for every transaction thereafter. We are interested in being part of the initial discussions. My sense is that although there is now a relatively large pool of capital in New Zealand there is also a relatively restrictive set of investment guidelines covering where much of these funds can be invested. As I see it, our responsibility is to continue to invest in our own capabilities while at the same time educating our clients on the merits of developing these fledgling funding markets. ■

“WE ARE FOCUSED ON WHAT WE CAN DO TO BE BETTER. IN THIS CONTEXT, IT MEANS WORKING WITH ARRANGERS AND BORROWERS WHO ARE LOOKING FOR SOLUTIONS. IT DOESN’T HAVE TO MEAN THE DEVELOPMENT OF A NEW HIGH-GRADE ASSET CLASS – WHETHER IT BE THE RMO OR SENIOR-SECURED INFRASTRUCTURE FUNDING.” DAVID MCLEISH FISHER FUNDS

COPUBLISHED COMMENTARY

GLOBAL REFORM OF INTEREST RATE BENCHMARKS Commonwealth Bank of Australia discusses the drive to improve processes and controls around interbank offered rate (IBOR) submissions.

ork is underway in multiple jurisdictions to identify and transition towards alternative risk-free rates. These rates represent more appropriate benchmarks for products and transactions, including cleared swaps that do not need to incorporate the credit risk embedded in IBORs. Meanwhile, the future of the London interbank offered rate (LIBOR) itself is uncertain as the steadily declining market for unsecured bank borrowing has increased the benchmark’s dependence on submitting banks’ “expert judgement”.1 In July 2017, the UK’s Financial Conduct Authority, which oversees LIBOR, announced it would no longer compel banks to submit rates from 2022.2 While LIBOR may continue, this means its future beyond 2021 is not guaranteed. Other key European benchmarks, such as the European interbank offer rate and euro overnight index average face similar issues, for similar reasons.

AUSTRALIA NOT IMMUNE In Australia, the key IBOR benchmark is bank bill swap rate (BBSW). This is still a relatively actively traded market. As the Reserve Bank of Australia (RBA)’s deputy governor, Guy Debelle, says: “The critical difference between BBSW and LIBOR is that there are enough transactions in the local bank-bill market each day relative to the size of our financial system to calculate a robust benchmark...We think BBSW can continue to exist even if credit-based benchmarks, such as LIBOR, are discontinued in other jurisdictions”.3 Nevertheless, Australia has implemented supervisory reforms to align with the global agenda. First, the BBSW 1 federalreserve.gov/newsevents/speech/powell20171102a.htm 2 fca.org.uk/news/speeches/the-future-of-libor 3 rba.gov.au/speeches/2018/sp-dg-2018-05-15-2.html

calculation methodology has been strengthened. It is now derived directly from a wider set of daily market transactions.4 Second, the Australian Securities and Investments Commission (ASIC) has introduced a new financial-benchmarks regulatory regime.5 This empowers ASIC to set the rules for, and license administrators of, benchmarks like BBSW and compel submissions to a significant benchmark in the rare circumstances where, according to the RBA, the benchmark would otherwise not be published. Following changes to BBSW reporting, each maturity is now reported by the Australian Securities Exchange (ASX). The new calculation methodology came into effect in May 2018. Despite strengthening the methodology, market activity in 30-day BBSW appears low relative to 60- and 90-day BBSW activity, largely due to bank liquidity regulations that disincentivise the issuance of short-dated liabilities. The data show a minority of trading – based on eligible volume, according to ASX benchmark data – occurs in the 30-day maturity. The RBA has acknowledged lower trading activity, with Debelle noting that “given this, users of products referencing 30-day BBSW should consider referencing 90- or 180-day BBSW going forward.”6

POTENTIAL IMPACTS Given the illiquid and volatile trading conditions of 30-day BBSW, issuers and investors – heeding advice from the RBA – may contemplate moving to 90- or 180-day BBSW. There are two considerations, though. The first is that 90-day BBSW may be the more suitable as it limits the basis risk facing residential mortgage-backed securities (RMBS) issuers whose incoming cash flows are typically reset on a monthly basis. The usage of a monthly resetting cash-based benchmark may limit basis risk even further. A cash-based reference rate based on reflecting a robust underlying market may support the most efficient market pricing. However, investment vehicles referencing such a rate may not be suitable for all buy-side mandates. Conversations with investors indicate a preference for a move to 90-day BBSW, as the use of a cash-based benchmark involves considerable operational and organisational complexity. Issuers of products such as RMBS or asset-backed securities may have to consider the impacts of such a change on their own hedging programmes. ■ 4 asxonline.com/content/asxonline/public/notices/2018/may/0490.18.05.html 5 asic.gov.au/about-asic/media-centre/find-a-media-release/2018-releases/18171mr-asic-implements-financial-benchmark-regulatory-regime/ 6 rba.gov.au/speeches/2018/sp-dg-2018-05-15-2.html

This information is a summary of market commentary from CBA’s Client Solutions team and is not to be considered as Independent Research. It has been prepared by CBA’s Client Solutions team and has no affiliation with CBA’s Global Markets Research, therefore any views expressed may differ from those of CBA’s Global Markets Research. As this information has been prepared without considering your objectives, financial situation or needs, you should, before acting on this information, consider its appropriateness to your circumstances and seek relevant professional advice. Any opinions, views of contributors, conclusions or recommendations are reasonably held or made, based on the information available at time of compilation, but no representation or warranty, either expressed or implied, is made or provided as to the accuracy, reliability or completeness of any statement made in this information. If you have a complaint in respect of this information, the Commonwealth Bank’s dispute resolution service can be accessed on 13 22 21. Commonwealth Bank of Australia ABN 48 123 123 124. AFSL and Australian credit licence 234945.

22 · Australian Securitisation Journal | Issue 15_2019

T Delivering secured funding solutions for a diverse spectrum of clients and assets. We understand that every clientâ&#x20AC;&#x2122;s needs are uniquely different. A well-planned and co-ordinated approach to funding strategy will help to ensure safe navigation through what can be a volatile market environment. This makes it critical to stay closely tuned to both unfolding events and insights from key partners such as your relationship banks.

Commonwealth Bank of Australia ABN 48 123 123 124. AFSL 234945.

To see how we can help your business, talk to our securitisation experts today. Contact Justin Mineeff, Executive Director, Debt Markets Securitisation on +612 9118 1234 or justin.mineeff@cba.com.au

COPUBLISHED COMMENTARY

SCALING UP FINTECH WITH SECURITISATION The fintech industry in Australia and New Zealand has evolved rapidly over the last five years and has gained significant traction in the last two. Westpac Institutional Bank (Westpac) examines the forces driving this growth.

he evolution is supported by existing retail bank consumers frustrated by perceived deficiencies with incumbent providers and millennials who are becoming increasingly relevant to banks as their incomes and wealth expands. The trend is expected to continue, with further regulatory and competitive pressures in the consumer and retail sectors affecting incumbent players. Open banking also represents a significant opportunity for nonbank lenders to approach bank customers, as switching costs for customers fall and technology starts to provide practical benefits. Emerging fintech players have shown themselves to be more agile and nimble than most incumbents in providing technological solutions that solve customer problems. For fintech players, equally as important as securing a solid foundation via a series of equity raises through the fintech lifecycle (see chart) is the establishment of a debt programme allowing a fintech firm efficiently to fund its growth. This requires it to find a trusted debt partner that generally provides a securitisation warehouse or similar debt facility secured against assets originated by the fintech. C H A RT 1 : F I N T E C H LIF E C Y C LE

Emerging player; build and launch Concept and build platform

Early growth; establish series A l Revenue growth, however loss making l Equity dilution to fund growth and funding structures

BALANCE SHEET LIGHT

Established; set up to scale series B and C l Fast revenue growth, still loss making. Cash burn decreasing l Further equity funding to strengthen balance sheet, and fund operations l Class A institutional lender or alternate debt l Corporate debt with equity-like structure

ASSET POSITION INCREASES

Historic institutional funding market S O U RCE: WESTPAC IN STITUTION AL BAN K 24 OCTOBER 2018

24 · Australian Securitisation Journal | Issue 15_2019

Leading player; scale series C and D l Acquisition financing l Institutional SPV structure l Ratings and capital advisory l Highly profitable given operating leverage

Long-term potential l Multibank structure l Debt capital markets

SIZEABLE/STABLE ASSET POSITION Future institutional funding market

These partnerships can also provide the fintech with access to transactional banking services and be a source of business intelligence that informs its strategies. To capitalise on this opportunity, traditional institutional funders, including Westpac, have adapted to the changing market by providing bespoke solutions for financing conventional asset classes originated and managed by nontraditional players. Historically, institutional funders only had appetite for companies of scale and profitability. However, the paradigm is shifting as institutional funders look to position themselves in this growth market. These bespoke solutions are structurally enhanced compared with traditional securitisation warehouses, addressing a number of factors. These include the limited portfolio track record, servicer history and profitability, and the – often untested – intellectual property driving the businesses. Structural features may include additional credit enhancement, stop-funding events or amortisation triggers, tighter initial eligibility criteria and portfolio parameters, and focus on a credible back-up servicer.

GROWTH SECTORS The overall market for structured funding in the emerging fintech sector is currently estimated to be more than A$2 billion1, having increased by an average of 120 per cent in 2016 and 2017. Institutional funding has increased over the past two years and is expected to be a driving force of the growth of this segment in the short term. Many asset classes are proving fertile ground for significant growth opportunities. Consumer finance, including point-ofsale and personal loans, is the most rapidly growing, driven by high asset demand and the relative success of the companies operating in this space. SME financing is another rapidly increasing segment, given the market gap and the limited appetite of incumbents. Fintech mortgage originators are also starting to enter the market, with most promising to reduce the costs and inconveniences associated with residential mortgage products through high-tech platforms. Meanwhile, digital or “neo” banks are a new segment that is gaining traction and will likely need various funding solutions should their intention be to provide more than one product. Westpac, including through its related activities, has been a leading player in this segment and continues to form partnerships and provide solutions to established fintechs. Its considered approach means it is uniquely placed to partner and support emerging high-growth companies. ■ 1 The analysis has been conducted on the emerging fintech sector that is in the market for senior funding through warehouse structures or provides a lending service through P2P platforms. These companies are post revenue, have an accepted business model and are typically at series A or B equity raisings. Data has been sourced from internal intelligence and publically available information. The data is not considered to be 100 per cent accurate and not to be relied upon externally given the access to information and the significant amount of unknown private investments in this sector.

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COPUBLISHED COMMENTARY

GREEN SECURITISATION: ONE STEP ON THE ROAD It has been yet another important year for environmental, social and governance (ESG) and socially responsible investment in Australian capital markets. National Australia Bank (NAB) says it is pleasing to see securitised product making further steps forward in what is becoming a sizeable and significant component of global markets.

AB arranged and distributed, as sole lead manager, the first residential mortgage-backed securities (RMBS) transaction to include a green tranche from any Australian issuer. The issuer was NAB, the transaction was National RMBS Trust 2018-1 (NRMBS 2018-1), and the green tranche comprised A$300 million (US$213.9 million) of a total A$2 billion transaction size. This was also the world’s first RMBS with an underlying pool comprising both nongreen and green residential mortgage securities that has been certified by the Climate Bonds Initiative (CBI). One of the reasons we had not previously seen a green RMBS was the lack of criteria for determining how to classify a mortgage as green in Australia. However, in 2018 CBI released proxy criteria for Australian low-carbon residential buildings, effectively allowing issuers to use the year of construction for mortgage securities located in New South Wales, Tasmania and Victoria. We know this framework will evolve and get stricter over time, supporting CBI’s aim to achieve a zero-emissions target for the residential-building sector by 2050. NAB has been involved in previous green securitisation transactions, arranging and leading FlexiGroup’s now regular issuance of consumer-loan-backed transactions including green tranches. But a green RMBS was a significant leap forward, given the size of the asset class in Australia and also when considered in the context of the total residential mortgage market. Of particular interest is the volume of new

26 · Australian Securitisation Journal | Issue 15_2019

construction which will potentially qualify for green issuance in future if used as mortgage security. In relation to NRMBS 2018-1, proceeds from the class A1-G notes were allocated to funding mortgages backed by eligible Australian residential properties which meet the Climate Bonds Standard criteria for Australian low-carbon residential buildings. The residential-properties criteria leverage local building codes and energy ratings or labels as a proxy for the carbon-emissions performance of the top 15 per cent of residential buildings in a city. The class A1-G notes attracted significant interest from investors, with a total of 18 accounts participating in this tranche. We believe the significance of this transaction is enormous, especially given the CBI has identified securitisation as the largest area of growth for labelled green bonds going forward. We know there is almost insatiable demand for green and social bonds globally from investors, so to be able to design and offer an Australian securitisation product which meets their requirements is a huge step forward. We also believe that offering green tranches as part of RMBS transactions from Australian issuers will be an effective way of expanding overall appetite and interest for Australian product, particularly in relation to offshore investors – especially those in Europe. We know, as an industry, that we need to continue to work on expanding the investor base, particularly for triple-A rated securitisation. Green issuance could be a contributor to this goal. It is important that we maintain regular issuance and demonstrate that, over time, we will be a regular supplier of this product to investors. The need for consistency is a mantra from investors globally across all product: they want regular issuance from committed issuers. We know it is possible to offer a transaction where the entire pool of underlying mortgages meets green criteria, and therefore all the notes offered are green. However, we believe this will be difficult to achieve for some time given the current criteria and issuers’ data capture on the back book – in other words, having a way to verify whether loans meet the criteria. This is also why the successful NRMBS 2018-1 transaction is significant. Its mixed-pool approach allows issuers to include a certified green tranche as one part of the transaction – therefore not restricting total funding goals for the issuer. However, over time, we expect data capture to become more advanced and therefore issuers will be able to meet the CBI criteria even as they become broader. This will allow them to tap a developing investor base and, importantly, contribute to an important environmental cause. We look forward to working with issuers and investors in the future in relation to ESG issuance and investment, and are highly committed to this important cause. ■

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COPUBLISHED COMMENTARY

REFLECTIONS ON 10 YEARS SINCE THE FINANCIAL CRISIS The end of 2018 is bringing much reflection on how global markets have recovered in the decade since the global financial crisis. ANZ

writes about the extent to which some independent financial commentators seem to enjoy predicting that the next crisis will be worse than the last.

rticles proliferate on the rise of collateralised loan obligations, the end of low interest rates, the end of the US equities bull market, the inevitable Australian housing crash and the finalisation of bank capital and liquidity rules designed to avoid the next financial crisis. The first aspect to consider is what has become of the Australian securitisation market and the next is where it might be heading. Proponents of the market can highlight many positives. These include a real ability to fund the growth of nonbank lenders and the delivery of consistently attractive credit spreads and principal to investors in residential mortgagebacked securities (RMBS) issues that have amortised away without loss, as expected. Investors in most tranches receive more hard subordination today. They also have more ability to analyse collateral through better data and powerful analytic solutions available from numerous providers. Those less interested in advocating the positives can point to limited secondary-market liquidity, no extension away from residential mortgages and auto loans into esoteric asset classes, limited ability to issue term RMBS in currencies outside of Australian dollars and securitisation funding a very small percentage of the mortgages and auto loans written in Australia. The market remains heavily concentrated in RMBS and it is hard to see any catalyst for this to change.

NEXT MOVES Future investors in prime Australian RMBS appear likely to benefit from very high-quality mortgage pools, underwritten by lenders with a firm eye on the responsible-lending regime and Australian Prudential Regulation Authority speed limits. Substantial credit enhancement will be available as the rating agencies run stress scenarios derived from worst-case historical outcomes. 28 · Australian Securitisation Journal | Issue 15_2019

Investors are unlikely to see increasing secondary-market liquidity from trading desks as capital and liquidity rules make it more difficult to hold inventory. Whether buyers of lenders’ mortgage insurance-dependent RMBS tranches will be able to choose such dependence is still to play out. An insurance product that requires a consumer to pay a premium to insure not themselves but their lender, and that has historically paid out a low percentage of the premiums to the insured party, may attract some regulatory refinement. Investors should see enough supply. With maybe 5 per cent of Australian mortgages sitting in securitisation structures there will be no shortage of collateral if lenders choose to issue in this format. This should be true even if residential property increasingly becomes something to be lived in rather than invested in. Population growth in Australia will remain strong and their accommodation will need financing. New lenders are emerging to augment the bank sector and those that flourish are likely to use securitisation for around 20 per cent of their funding needs. In the auto space, data suggest Australians borrowed more than ever to buy new cars in 2017. However, it seems plausible that underlying loan collateral could change materially in the future. Car ownership may no longer exist for many urban residents, as use of ride-share services and a subscription model is introduced for autonomous vehicles. Responsible-lending rules may also affect borrowing to buy depreciating assets that consumers might be better off without. As the Australian Securities and Investments Commission’s MoneySmart service puts it: “Don’t let the thrill of owning a car get in the way of making good financial decisions.” As it currently stands, the Australian securitisation market funds only a modest number of captive auto-finance companies for global manufacturers and a few multi-brand dedicated finance companies. Industry consolidation of global manufacturers and their finance companies, and the noncaptive finance companies, appears likely to be a recurring theme given strong economies of scale. The noncaptive businesses appear destined to be operated mainly by specialist leasing companies rather than major banks. Opportunities for innovation in structuring securitisation transactions in Australia are hard to find given the level of regulation and the need to work within rating-agency criteria. Innovation and change is occurring in the interface between lender and borrower, and in distribution channels for mortgages, car loans and small-business loans. Borrowers that are comfortable with disclosing their full financial situation to prospective credit providers should benefit from the efficiency of these distribution channels and also from data-driven risk pricing. Overall, this should be positive for securitisation of these assets. Here is hoping the next decade is spent transacting, rather than recovering from a crisis and re-regulating! ■

COPUBLISHED COMMENTARY

THE IMPACTS OF A PERMANENT RULE 17G-5 EXEMPTION ON AUSTRALIAN SECURITISERS The territorial scope of the amendments by the Securities and Exchange Commission (SEC) to rule 17g-5 of the US Securities Act (rule 17g-5) are broad and cover various product types. Leading US law firm, Mayer Brown, shares vital insights into how the amendments and the proposed permanent exemption could affect Australian securitisers.

S regulations for nationally recognised statistical The idea behind the rule was to create a market where rating organisations (NRSROs) took effect in June 2010. accessing NRSROs would access information provided to hired Among many changes, the SEC amended rule 17g-5 NRSROs and provide unsolicited ratings on ABS and moneyto facilitate unsolicited ratings from NRSROs that were market instruments free from potential conflicts of interest not hired to rate particular asset-backed securities and self-dealing that may taint ratings paid for by the deal (ABS) and other structured-finance products. parties rather than investors as users of the ratings. The amendments, which are collectively referred to as the The rule is well grounded in theory but, in practice, no “website rules”, enable non-hired NRSROs (accessing NRSROs) NRSRO has accessed information made available by the rule to access the same rating-related information as NRSROs that to issue an unsolicited rating. This caused many industry are hired (hired NRSROs) to rate the relevant transaction. participants to question continued compliance with the rule The website rules are relevant to any issuer of a structuredfor US transactions that have not benefited from the temporary finance product that is rated by an NRSRO, including nonforeign-issuer exemption. US issuers, and even transactions that have no US investors In order to issue or maintain ratings on structured-finance or other connection to products where the rating is paid the US. Standard practice for by an arranger, paragraph for Australian market (a)(3) of rule 17g5 requires “The rules are relevant to any issuer of a participants issuing securities hired NRSROs to take specified structured-finance product that is rated by into the US has been to steps, which the SEC intends as comply with rule 17g-5 if the mitigants to the impact of the an NRSRO, including non-US issuers, and transaction did not fall under even transactions that have no US investors conflict of interest by facilitating temporary exemption. unsolicited ratings. or other connection to the US.” Specifically, a hired NRSRO SPECIFIC STEPS that wishes to issue or maintain While the website rules only such a rating must fulfil certain apply directly to NRSROs, they also necessitate significant criteria. The first is maintaining on a password-protected efforts by issuers, sponsors and intermediaries assisting website (a hired NRSRO site) a list (the ratings-in-process list) of with the rating process. The adopting release for the website each structured-finance product for which it is currently in the rules uses the term “arranger” to refer collectively to issuers, process of determining an initial credit rating, with specified sponsors and underwriters that may be required to maintain information including the name of the issuer, the date the websites in compliance with rule 17g-5. rating process was initiated and the address of a passwordHowever, issuers or sponsors have usually been the parties protected website (an arranger site) where an arranger is that actually carry out these responsibilities on behalf of maintaining the transaction-related information. all transaction parties because they generally hire NRSROs The second is providing access to its hired NRSRO and have a significant interest in controlling rating-related site to accessing NRSROs, subject to certain certification information. requirements. Paragraph (b)(9) of rule 17g-5 identifies “issuing or Third is obtaining a written representation that can maintaining a credit rating for a security or money-market reasonably be relied upon from an issuer, sponsor or other instrument issued by an asset pool or as part of any asset- or arranger of each structured-finance product on the hired mortgage-backed securities transaction” as a conflict of interest NRSRO’s ratings-in-process list to the effect that the issuer for an NRSRO. In other words, a structured-finance product or other arranger will maintain an arranger site containing that was paid for by an arranger. rating-related information.

30 · Australian Securitisation Journal | Issue 15_2019

This must provide accessing NRSROs access to the arranger site, subject to certain certification requirements. It must also post on the arranger site all the information the arranger provides, or contracts with a third party to provide, to the hired NRSRO for the purpose of determining the initial credit rating for the structured-finance product or rating surveillance, all in a manner indicating which information currently should be relied on to determine or monitor the credit rating. While arrangers are not directly subject to the website rules, it is clear the SEC intends to take seriously any failures by arrangers to perform the obligations they undertake. NRSROs will essentially not be permitted to provide ratings unless arrangers undertake those obligations.

EXTRATERRITORIAL REACH The website rules are silent as to their territorial reach, focusing instead on the activities of NRSROs. Prior to adoption of the website rules, the major credit-rating agencies active in the US had registered not only themselves but also all or most of their foreign affiliates as NRSROs. As a result, the website rules appear to apply to all ratings on structured-finance products issued by any US rating agency or any of their foreign affiliates. This would include transactions conducted wholly outside the US where the only US connection is a rating by an entity that is registered as an NRSRO. In other words, an NRSRO that provides a rating for a structured-finance product that has a non-US issuer and a nonUS sponsor and is sold entirely to non-US investors would still be subject to these rules and would need to seek compliance by the arrangers of that transaction. Staff from several non-US securities regulators, as well as a number of market participants, notified the SEC that arrangers of structured-finance products located outside the US generally had not been aware of the extraterritorial reach of the rules and would not be prepared to comply with them. This created potential disruption of any new issuance activity in local securitisation markets. The non-US securities regulators and European issuers also expressed concern about possible conflicts between the website rules and EU data-protection and bank-secrecy law, rating regulations and possibly other EU and national laws. Responding to these concerns, in May 2010 the SEC issued an order granting a temporary exemption from the website rules for transactions in which the issuer is a non-US person and the hired NRSRO has a reasonable basis to conclude that the structured-finance product will be offered and sold upon issuance, and that any arranger linked to the structuredfinance product will effect transactions after issuance only in transactions that occur outside the US. This exemption only applied until December 2010, but it has been periodically and continuously extended for additional temporary periods since then. The exemption, however,

does not apply if a structured-finance product issued by a nonUS person is being offered in the US or otherwise to US persons – for example, in a combined rule 144A/Reg S offering. After several extensions of the original temporary exemption, in September 2018 the SEC proposed a permanent exemption from rule 17g-5 with respect to credit ratings, if the issuer of the security or money-market instrument referred to in the rule is not a US person and the NRSRO has a reasonable basis to conclude that all offers and sales of such security or money-market instrument by any issuer, sponsor or underwriter linked to such security or money-market instrument will occur outside the US. The requirement that all offers and sales of such security or money-market instrument occur outside the US should not require a prohibition in secondary trades to US persons if those secondary trades are not initiated by the issuer, the sponsor or an underwriter. It would, however, be prudent for all parties to the underwriting or subscription agreement for a rated non-US offering to covenant to each other that they will not engage in offers and sales of securities or money-market instruments that would make the exemption unavailable. The SEC also proposed conforming amendments to similar exemptions in rules regarding reporting of due-diligence services, specifically rule 17g-7(a) and rule 15Ga-2. If adopted, the proposed rule would effectively make permanent the temporary conditional relief provided by the SEC.

COMPLIANCE BURDEN The proposed permanent exemption will codify market practice for offshore securitisers that issue securities outside the US. Given no known accessing NRSRO has attempted to access a hired NRSRO site or arranger site, the necessity of rule 17g5 is debatable. But, even so, until now there has not been much traction towards a permanent exemption for offshore securitisers issuing into the US. Should the SEC adopt the proposed exemption in its current form, participants in US transactions might petition the SEC for relief from some or all aspects of the rule. They would have grounds for doing so. It is hard to argue that investors have benefited from the additional compliance burden that has been placed on transactions to achieve compliance with the rule. ■ ◆ for further information please contact:

Amanda Baker amanda.baker@mayerbrown.com +1 212 506 2544 Jon Van Gorp jvangorp@mayerbrown.com +1 312 701 7091 Stuart Litwin slitwin@mayerbrown.com +1 312 701 7373 31

ROUNDTABLE

Australian securitisation in the round Having experienced its low point just less than a decade ago, Australian securitisation enjoyed a record year for issuance volume and diversity in 2017. The current year has been more measured, but market conditions are still relatively robust a decade on from the financial crisis. ASJ took the opportunity to speak to some of the market’s leading players, getting perspectives on evolution since the dark days of the financial crisis, the most interesting developments seen so far, the state of play in critical asset markets at the end of 2018 and what might be on the slate for the decade ahead. PARTICIPANTS ◆ Gareth Aird Senior Economist COMMONWEALTH BANK OF AUSTRALIA ◆ Narelle Coneybeare Senior Director and Sector Lead, Structured Finance S&P GLOBAL RATINGS ◆ Tally Dewan Senior Securitisation Strategist COMMONWEALTH BANK OF AUSTRALIA ◆ Rod Ellwood General Manager, Debt Markets Services PERPETUAL CORPORATE TRUST ◆ James Kanaris Director, Structured Finance WESTPAC INSTITUTIONAL BANK ◆ Kevin Lee Division Director, Fixed Income and Currencies MACQUARIE BANK ◆ Graham Metcalf Global Head of Structured Capital Markets ANZ ◆ Justin Mineeff Executive Director, Debt Markets Securitisation COMMONWEALTH BANK OF AUSTRALIA ◆ Sarah Samson Head of Securitisation Origination NATIONAL AUSTRALIA BANK ◆ Ilya Serov Associate Managing Director, Structured Finance Group MOODY’S INVESTORS SERVICE ◆ Haan Ti Executive Director, Structured Finance MUFG SECURITIES ◆ Natasha Vojvodic Senior Director and Head of Australian and New Zealand Structured Finance FITCH RATINGS

CONDITIONS IN 2018 ASJ We are 10 years out from the global

financial crisis and the Australian housing market is showing signs of weakness for the first time since. How well set up do you believe the securitisation market is to withstand the potential stress scenarios? ◆ DEWAN

The financial crisis was an unanticipated global shock. By contrast, the current Australian housing market slowdown has to some extent been engineered by regulatory measures. This slowdown is being well flagged by various indicators, and market participants are incorporating the risk. Our base-case scenario for dwelling prices is likely to have a widening bias on spreads and headwinds on issuance. But we expect a limited impact on ratings of residential mortgagebacked securities (RMBS) notes under such a base-case scenario. ◆ METCALF The global financial crisis and recent softening in valuations for Australian residential properties don’t belong in the same sentence. We are experiencing a healthy retracement of unsustainable annual gains in an asset class that in some cities outperformed on a five-year view. Australian mortgage securitisation deals are structured to cope with very significant stress. With 5 per cent unemployment and 3 per cent GDP growth feeding into 1.3 per cent prime arrears, we are a long way from problematic stress. In ‘securitisation land’, prime arrears are little different from mid-2008 – but in 2018 senior investors get 8 per cent subordination versus less than 2 per cent on some 2007 issues. This covers a lot of stress, should it arise. ◆ SAMSON I agree that the securitisation market is actually incredibly well set up to deal with a weaker property market. It’s important to remember that we managed through the financial-crisis period very well, and I think we are even better placed now. Regulation has only increased since the crisis, and issuers have only become more conservative since that time in their underwriting and servicing standards, and also in their lending products. Our securitisation structures are also more conservative, with very little reliance on lenders’ mortgage insurance (LMI) in our prime mortgage transactions for example, and most transactions have material buffers over and above the required credit support – from the rating agencies – at most rating levels.

“NOT ALL OFFSHORE INVESTORS ARE COMFORTABLE INVESTING IN AUSTRALIAN DOLLAR SECURITIES. INCREASINGLY, WE HAVE SEEN ISSUERS OPT FOR US DOLLAR OR EURO DENOMINATED SECURITIES, DESPITE THE COST OF CROSS-CURRENCY SWAPS. I THINK WE WILL SEE MORE OF THIS IN FUTURE.” HAAN TI MUFG SECURITIES

32 · Australian Securitisation Journal | Issue 15_2019

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ROUNDTABLE

Royal commission to stir, but not shake, Australian market THE FIRST QUARTER OF 2019 WILL SEE AUSTRALIA’S ROYAL COMMISSION INTO MISCONDUCT IN THE BANKING, SUPERANNUATION AND FINANCIAL SERVICES SECTOR DELIVER FINAL RECOMMENDATIONS. MOST MARKET PARTICIPANTS EXPECT AN IMPACT ON LENDING, BUT PERHAPS NOT MUCH ON THE STRUCTURED-FINANCE MARKET.

ASJ What do we know so far, and what can we predict with any degree of confidence, about the outcome of the banking royal commission on the lending and securitisation landscape in Australia? SEROV The interim report poses a

lot of questions and we expect the final recommendations to come through in February. There are two things to watch out for in the securitisation market. One is any changes in underwriting that need to be implemented by lenders, particularly regarding expense and income verification for borrowers. This will require some tweaking of lending processes. The second is a question of how the royal commission looks at the regulatory landscape, how it may affect the way the regulators themselves operate and their areas of focus. We do not necessarily expect big changes at the moment, but it is one to watch. CONEYBEARE To date, the interim report by the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Sector has not affected any of our Australian bank or structured-finance ratings. However, the final report will contain new recommendations and we will assess the full impact of these in due course.

We note that S&P Global Ratings has already lowered the industry risk score for the Australian banking system to reflect a recalibration of our assessment of overall bankingsystem risks as they relate, among other things, to conduct, culture and governance issues. This is especially in light of the information that has emerged in the past two years, including the information revealed in the course of the royal-commission hearings throughout 2018. We note that the banks are already acting on the royal commission’s interim report, and we’re of the view that the wider securitisation market is likely to see changes in lending practices especially around conduct, culture and governance. When it comes to lending practices, we expect to see a greater focus on borrowers’ financial positions and, consequently, the possibility of more conservative lending practices in the coming years. METCALF I think we know for sure that expense-verification processes will be more onerous and remuneration models will change for those involved in distributing mortgages. We are yet to know the precise impact on the provision of secured credit to various categories of homebuyers and investors. For example, we don’t know the precise rules of engagement with borrowers who have very

substantial assets but little income from predictable employment. VOJVODIC Even before the royal commission, regulatory oversight was beginning to filter through the system and cause lenders to change their practices. This is likely to continue, particularly around loan serviceability and affordability. This focus on responsible lending will continue, but I don’t necessarily think there will be large-scale changes in the mortgage market. ELLWOOD What we can expect is increased regulation, governance and compliance on all forms of consumer lending to protect the consumer and to prevent bad practices. This will add complexity and cost that will need to be borne either by the consumer or the business and, ultimately, the shareholders. Borrowers may find it much harder to get funding or to refinance existing facilities, which may in turn lead to increased mortgage stress in the market. However, the percentage of the total mortgage market that is funded through securitisation is driven more by credit conditions in the capital markets than by underlying lending volume or growth rates. With all these changes and challenges also come opportunities to deliver new and innovative solutions with different business models.

“Even before the royal commission, regulatory oversight was beginning to filter through the system and cause lenders to change their practices. This focus on responsible lending will continue, but I don’t necessarily think there will be large-scale changes in the mortgage market.” NATASHA VOJVODIC FITCH RATINGS

34 · Australian Securitisation Journal | Issue 15_2019

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ROUNDTABLE

“IF A BLOCKCHAIN TECHNOLOGY SOLUTION WAS IMPLEMENTED THAT IN SOME WAY LED NOT JUST TO ADMINISTRATIVE EFFICIENCIES IN THE WAY THE MARKET OPERATED BUT ALSO FOSTERED AN ACTIVE SECONDARY MARKET AND THE INVOLVEMENT OF A BROADER RANGE OF INVESTORS AND ISSUERS, IT WOULD ELEVATE THE PRODUCT TO ANOTHER LEVEL.” JUSTIN MINEEFF COMMONWEALTH BANK OF AUSTRALIA

If you focus on the main part of the capital structure – the triple-A tranche – the stress this is able to withstand is huge. For instance, S&P Global Ratings applies a 45 per cent marketvalue decline assumption across the entire portfolio as part of its analysis. It is hard to see how any transaction could be affected, even from a rating-transition perspective. ◆ SEROV The effects of the financial crisis were limited in Australia and the RMBS market came through the episode reasonably well. Although some lenders’ business models came under pressure, securitisation transactions continued to perform well. Structures are even more resilient today. There is greater ability to place junior notes, which tends to support senior bondholders in the case of a stress scenario. Comparing 2018 to 2008 on a macro level, the tail risks in the Australian housing market are arguably more acute now and the market is in the middle of a mild correction. But the broader picture suggests the economy is well placed. ◆ CONEYBEARE Also, the overall level of securitisation outstanding, in Australia as well as globally, is significantly less than we saw in 2008 and the split of offshore and domestic investors is different from 2008. Some of these factors could be expected to behave differently in any stress scenario. What’s more, securitisations today are structurally more straightforward and tend to have mechanisms designed to kick in and mitigate the effects of collateral stress. Interestingly, there is now significantly less LMI overall in Australia and more transactions are tranched down – which was not really a feature 10 years ago. Low-doc lending now makes up a much smaller percentage of loans in the RMBS sector, and overall we have also seen lower weighted average loan-to-value ratios (LVRs). It’s our view that the Australian Prudential Regulation Authority

(APRA)’s lending guidance, introduced from 2014 onwards, has strengthened underwriting standards and limited exposures to investor and interest-only lending. These factors should help limit stress that may be more concentrated in particular pockets of borrowers. ◆ TI I think credit performance of Australian RMBS will continue to track well despite signs of weakness in the housing market. In my opinion, the employment rate will have a far greater impact on portfolio arrears performance than property prices, and so long as unemployment rates remain stable I’d expect mortgage arrears to perform well. Most lenders have strengthened underwriting practices over the last decade, and this has been reflected in historical arrears performance. ◆ ELLWOOD In many ways, the financial crisis and its aftermath created substantial relief for Australian households. Mortgage interest rates were as high as 8 per cent in 2008 and this put considerable pressure on households. The crisis provided the opportunity for the Reserve Bank of Australia (RBA) to cut rates and help mortgage holders. A basic variable-rate home loan today has an interest rate of 3.8 per cent. At the same time, a global financial crisis that hit Australia would, potentially, be more painful as the scope for rate cuts by the RBA is limited.

ASJ What is your Australian housing outlook?

What key indicators might suggest the situation could be deteriorating beyond the current most likely scenario? ◆ CONEYBEARE

We expect the housing imbalances that have built up over the past few years to continue to unwind in an orderly manner for the next two years. Macro indicators still point to moderate, but stable, growth. Although house

“THE GLOBAL FINANCIAL CRISIS AND RECENT SOFTENING IN VALUATIONS FOR AUSTRALIAN RESIDENTIAL PROPERTIES DON’T BELONG IN THE SAME SENTENCE. WE ARE EXPERIENCING A HEALTHY RETRACEMENT OF UNSUSTAINABLE ANNUAL GAINS IN AN ASSET CLASS THAT IN SOME CITIES OUTPERFORMED ON A FIVE-YEAR VIEW.” GRAHAM METCALF ANZ

36 · Australian Securitisation Journal | Issue 15_2019

Why are 90+ day arrears rising when 30 day arrears are stable? Ask Fitch why Prime RMBS Dinkum (%)

30-59 days

60-89 days

>90 days

2.0 1.6 1.2 0.8

Jun 19

Jun 18

Jun 17

Jun 16

Jun 15

Jun 14

Jun 13

Jun 12

Jun 11

Jun 10

Jun 09

Jun 08

Jun 07

Jun 06

Jun 05

0.0

Jun 04

0.4

Source: Fitch

Change in Home Prices vs. 90+ Days Arrears (%)

Annual change in home prices (LHS)

(%)

90+ days arrears (RHS)

0.8

0.7

0.6

-5

0.5

-15

0.4

-25 Jun 08

Jun 09

Jun 10

Jun 11

Jun 12

Jun 13

Jun 14

Jun 15

Jun 16

Jun 17

0.3 Jun 18

Source: CoreLogic/Fitch

fitchratings.com

@fitchratings

ROUNDTABLE

“WE EXPECT THE HOUSING IMBALANCES THAT HAVE BUILT UP OVER THE PAST FEW YEARS TO CONTINUE TO UNWIND IN AN ORDERLY MANNER FOR THE NEXT TWO YEARS. ALTHOUGH HOUSE PRICES ARE UNDER SOME PRESSURE, GOOD SUPPORTING FACTORS SHOULD HELP MODERATE ANY SIGNIFICANT DECLINE.” NARELLE CONEYBEARE S&P GLOBAL RATINGS

prices are under some pressure, especially in Melbourne and Sydney, supporting factors should help moderate the decline. In our view, changes to employment conditions are the most critical in as they pertain to mortgage performance. The outlook for GDP and employment growth is supportive of ongoing good performance in home-loan arrears. ◆ VOJVODIC Prices have begun to come off in Sydney and Melbourne but we do not see this as the beginning of a significant downturn. While government and regulatory measures have had an effect, many of the elements which have driven up prices are still present. Interest rates remain low, the economy remains strong, unemployment is stable and population growth is still significant. We think these factors will mitigate against a significant fall in house prices. If any of these indicators begin to deteriorate it could potentially change our forecast. But the Fitch Ratings (Fitch) base case currently doesn’t expect this. ◆ AIRD It is our view that prices will to continue to deflate over the next year, as evidenced by the leading indicators. Credit standards have been tightened and this will continue to weigh on the flow of new lending, new dwelling supply will remain elevated, mortgage rates are more likely to go up than down and buyer expectations have adjusted downwards from exuberance to more sober levels. We do not expect a hard landing, however. Population growth, driven by net immigration, is expected to remain strong. Rental growth is also still positive, which ensures yields look reasonable in a low interest-rate world. We also expect the unemployment rate gradually to drift lower, which means the risk of default is low. Against this backdrop we expect the RBA cash rate to be on hold for at least another year. In summary, we expect the orderly deflation in dwelling prices to continue against an economy that is performing

relatively well from an output and employment growth perspective. Nationally, we think dwelling prices will end the year down by around 3 per cent with a roughly similar outcome likely in 2019. This would mean the total correction is not too dissimilar to the corrections of 2010 and 1989. ◆ ELLWOOD We have a similar view: that the most likely outcome is for an aggregate price decline of around 8-10 per cent over a further 18 months. This reflects current low sentiment in the market, pressures on owner-occupiers in particular and the likelihood of stable-to-higher mortgage rates – in particular because of rising bank funding costs – coupled with a further tightening of mortgage-lending standards. While a global financial crisis cannot be discounted, its low likelihood and the natural stabilisers in the Australian housing market would make falls beyond 10 per cent less likely, outside of specific markets such as luxury. In fact, the housing market could begin to bottom out in early 2019. This will be aided by a number of forces. First, the economy seems to be stable-to-improving and wages have accelerated in the last nine months. Similarly, rents are beginning to rise again, providing assistance to investors. Second, first homebuyers are taking advantage of lower prices and more affordable entry points. First homebuyer finance has risen by as much as 30 per cent since 2016. Third, a financial crisis would drive a weaker Australian dollar which in turn would make Australian housing more attractive to offshore buyers. ◆ SEROV Our base case is for a moderate deterioration. With the regulatory changes already in place there will continue to be a slowdown in lending. For mortgage performance, delinquencies and loss rates are trending up. But it is gradual, which means we do not see a sharp correction eventuating.

“NONBANKS HAVE WORKED HARD AT THEIR BUSINESS MODELS, GROWTH – MANY THROUGH NOTABLE PORTFOLIO AND BUSINESS ACQUISITIONS – AND PRODUCT OFFERINGS, AND EVEN HARDER ON THE FUNDING SIDE. THEY ARE NOW REALLY THRIVING.” SARAH SAMSON NATIONAL AUSTRALIA BANK

38 · Australian Securitisation Journal | Issue 15_2019

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Mixed bag forecast for issuer and collateral diversity RESIDENTIAL MORTGAGE-BACKED SECURITIES (RMBS) MAKE UP THE OVERWHELMING MAJORITY OF AUSTRALIAN-ORIGIN SECURITISATION ISSUANCE. MARKET PARTICIPANTS DO NOT EXPECT THIS FUNDAMENTALLY TO CHANGE – THOUGH THE SOURCES OF ISSUANCE MAY CONTINUE TO DIVERSIFY.

ASJ Australian securitisation is still a mortgage-dominated market. Will this ever change, and if so how and how quickly?

METCALF Forever is a long time, but the

answer appears to be no. The nearest competitor is motor-vehicle finance. Each month around A$20 billion (US$14.3 billion) of mortgages are written in Australia versus A$3 billion of auto loans. The issuers that use securitisation the most are mortgage lenders. The market having 85-90 per cent RMBS simply reflects this. On the positive side, it is providing a steady stream of RMBS for investors. KANARIS I think it’s fair to say the market is always going to be skewed to RMBS because the size of Australia’s trillion-dollar residential mortgage market dwarfs asset classes like credit cards and autos. By virtue of the fact that residential mortgages are such a large part of the funding market in Australia, this will likely always be the predominant asset class. Having said this, not only are we seeing more players in the assetbacked securities (ABS) market – like Latitude Financial Services, for example

– but we are also seeing existing RMBS issuers looking to diversify into alternative asset classes such as autos, as well as new fintechs entering the lending space. This means the Australian market is likely to see greater collateral diversity over time, and probably more volume – albeit not at a scale which exceeds RMBS supply. CONEYBEARE I think the asset classes that have the ability to issue regularly are the most likely to have a sustainable future. Among non-RMBS asset classes, consumer ABS is the one I see as most likely to become a bigger part of the overall market here. But I agree that overall volume will always be smaller than RMBS in comparison. VOJVODIC We have been receiving more enquiries from outside the mortgage market, particularly in the unsecured consumer-loan space. Technology will be a big factor in how the market evolves. More asset classes have emerged in the last few years, but I don’t think any will become as big as mortgages in the near future. The nature of the market in Australia, and the fact that mortgages are such a large part of

Our outlook may change if the degree of pull back in activity is greater than we currently anticipate. There is always the possibility of macroeconomic shocks which could have a greater effect. At the moment, though, our base-case economic scenario remains fairly positive. ◆ METCALF I think it is worth looking at this question from a slightly different angle. The recently released Fitch-KangaNews Australian fixed-income investor survey has 15 per cent of surveyed investors willing to forecast rising house prices nationally over the next two years, with no investor – even anonymously – prepared to forecast a rise of more than 10 per cent over two years. This is remarkable in the context of near full employment, 3.4 per cent GDP growth, a recovering commodities cycle, low interest rates and net people growth of around 3 per 40 · Australian Securitisation Journal | Issue 15_2019

banks’ and nonbanks’ businesses, means mortgages will naturally be the largest part of the market at least for the foreseeable future. LEE I agree that the makeup of the market is unlikely to change in the nearto-medium term. The nonbanks have seen strong mortgage-lending growth in recent times and, with their typically smaller balance sheets, are much more active and regular in accessing securitisation markets to fund this growth. For these reasons it is likely that RMBS will remain the dominant asset class over the medium term. Having said this, though, nonbank lenders are starting to look across a broader range of lending products including autos, credit cards, commercial loans and personal loans. As these products continue to gain traction, it is likely that more regular funding will be required from the capital markets. ABS is fairly small at present as a percentage of issuance, so while it’s difficult to see ABS ever dominating the market it’s possible that it could grow to contribute in excess of 20 per cent of total issuance in the long term.

cent per annum. The explanation is of course the regulatory desire to reduce household leverage to property, particularly as an investment. Predicting how this plays out is extremely challenging. It means the clues to any improvement or deterioration are found in unusual places.

SECTOR EVOLUTION ASJ What are the most interesting developments

in the Australian market over the past decade? ◆ TI

As has been mentioned, I think the most fascinating development has been the resilience of the Australian RMBS market since the financial crisis. We saw the Australian Office of Financial Management step in temporarily a decade ago. But since then the market has picked itself up, finding the support

SEROV The flow we are seeing indicates

the market continues to be dominated by repeat RMBS issuers. However, as others have said we are seeing new issuers either come to the market or begin the process of setting up funding platforms. These tend to be from more diverse parts of the market, such as the auto sector and the online personallending space. Over time these will develop. They are unlikely to be as large as the mortgage market but there will be some rebalancing. We think this is a mediumterm story that will play out over the next 3-5 years, rather than anything we will see immediately.

ASJ One thing we have seen in recent years is an increasingly diverse range of issuers active in the Australian market. Do you expect this to continue, specifically with more new names coming in as issuers? SAMSON I definitely do, yes. The driver

is the shape of the lending market. On the back of recent regulatory and

other changes, we have seen increased opportunity for lending away from the major banks, in mortgages but even more so in other asset classes such as autos and equipment and, more recently, consumer lending such as unsecured personal and SME loans. I expect this to continue as niche parts of the market continue to open up and new issuers with innovative product offerings enter. MINEEFF Fintechs are certainly a potential source of issuance in the future. Full implementation of the open-banking regime in 2019 should assist this development. Investor due diligence, the rigorous process required for creditrating assignment and the robustness of securitisation structures all require certain thresholds to be overcome prior to issuance, though. ELLWOOD We have seen new names and a diversity of issuers in recent years, which is a positive trend for the market. New fintechs and providers of the new forms of consumer finance will primarily look to the capital markets for costeffective funding.

We are collaborating with a number of new and exciting businesses that will look to refinance their existing warehouse facilities with term issuance into the securitisation market in future. CONEYBEARE The trend for issuer diversity is one we’re seeing across the globe, although there is typically a cyclical element to it. We expect to see new entrants in Australia, especially in new or innovative assets. At a systemic level, we like to understand where new issuers are coming from and the shape of their growth trajectory. Globally, we have seen increasing interest in nontraditional asset types, including transportationasset securitisations and innovative consumer financing with new technology behind it. METCALF Despite the current challenges of being a lender, there are a lot of new entrants to the lending market. Their capitalisation and business models will see them relying on secured debt funding and securitisation will be very efficient for them if they can meet the rules for entry.

“The flow we are seeing indicates the market continues to be dominated by repeat RMBS issuers. However, we are seeing new issuers either come to the market or begin the process of setting up funding platforms. These tend to be from more diverse parts of the market.” ILYA SEROV MOODY’S INVESTORS SERVICE

of domestic and offshore investors that recognise the strong credit quality and relative value of Australian RMBS. ◆ METCALF I also think we can say the Australian securitisation industry has survived the spotlight turned on it through association with inferior structured-product offerings from overseas markets. It is very positive that over the past decade investors in the product have received what they expected: consistently attractive credit spreads on an amortising note that is fully repaid. At 2017-18 issuance volume of A$30-40 billion (US$21.4-28.5 billion), a wide range of investors are buying five or six times 2008 volume. ◆ KANARIS Before the financial crisis, the majority of prime RMBS deals where the senior tranche was triple-A rated relied on 100 per cent LMI and the rating largely dependent on the LMI provider.

One of the biggest changes has been the move away from this model, such that the most senior tranche is now comfortably above the rating-agency requirement for LMI independence. These tranches can reach 16 or 17 per cent credit support – and sometimes more in nonbank transactions – and the robust credit protection coming through gives investors comfort. The market is also more mature in the mezzanine space with investors increasingly comfortable participating. This is important because subordinated positions also require funding, particularly for nonbanks and for authorised deposit-taking institutions (ADIs) looking for capital-relief deals. ◆ LEE I think the resilience and growth of the nonbank originator sector has been impressive, particularly coming out of the financial crisis. This has helped to offer diversity of 41

ROUNDTABLE

product both to the borrower market as well as to asset-backed securities (ABS) investors. We have also seen a broadening in the base of investors participating in mezzanine and subordinated tranches, both domestically and offshore. Finally, the growing appetite of some institutional investors to look at nonstandard transactions such as unrated private placements, whole-loan sales and participation in warehouse notes is encouraging. ◆ SAMSON I agree that the growth and success of the nonbank financial-institution sector is a real standout. Many nonbanks really struggled on the asset-origination side coming out of the financial crisis, and there was a large shift in market share going back to the major banks. However, the nonbanks have worked hard at their business models, growth – many through notable portfolio and business acquisitions – and product offerings, and even harder on the funding side. They are now really thriving, to the extent that they are now some of the largest issuers in the securitisation market by total volume. Another interesting development has been on the warehousing side. It is not often talked about as much of the financing is private, but unlike in other countries – such as the UK and US – the Australian warehousing market kept going through and following the financial crisis. We managed to adapt during this time, working to accommodate multiple parties across warehouse capital structures, such as mezzanine funders, as well as being able to be rated or unrated and some other innovative features. All of this enables issuers to use warehousing as an important funding tool. ◆ CONEYBEARE It’s certainly true that, from a performance perspective, nonbank lending has been notable in the last few years. This sector is currently performing quite strongly – better than other major sectors in securitised trusts. There have also been significant changes to data and reporting that have enhanced transparency in the Australian market. Combined with other regulatory developments, including macroprudential measures, there is now a greater ability meaningfully to compare data across the market. ◆ MINEEFF Further to the point about nonbank issuers, nonconforming RMBS has transformed itself from a marginal and less frequently issued product to more frequently issued

transactions with a broader mix of underlying borrowers. It has become an important part of many fixed-income portfolios. The past decade has also witnessed significant development of participants in the market. The large non-ADIs have grown significantly in people, product and breadth of offering. The success of these organisations has ultimately led to the latest iteration in the development of the market, which is the entry of major global private-equity firms.

ASJ There seems to be a sense among some

securitisation issuers that the domestic market is close to its natural capacity. Other than buy-side system growth, how can we further increase the scale of the Australian market? ◆ METCALF

Australian dollar RMBS issuance volume, of A$34.6 billion in 2017, was slightly above the 2006 boom issuance level of A$32.4 billion – albeit with another A$24 billion equivalent primarily issued in euros and US dollars in 2006. Australian dollar domestic corporate bond issuance was around A$15 billion in 2017, so it may be that further RMBS growth from A$35 billion is a challenge. Hopefully, the broader theme of a higher proportion of Australian wealth moving to investment in fixed income rather than equities will help grow Australian dollar securitisation. ◆ MINEEFF Funds under management grow over time but the reality is that securitisation finds itself vying with other product at any point in time. The fact that securitisation product has constituted in excess of 25 per cent of all primary product in recent years attests to its success. If issuers wished to expand supply faster than funds growth overall, arguably they would need to consider the marginal pricing required to achieve proportional gains against other product. ◆ KANARIS Liquidity is much talked about in Australian RMBS and ABS markets, and one pleasing developmental factor in this respect is the extent to which more banks are facilitating secondary trading. Ongoing improvements in liquidity and transparency in the secondary market will help support further primary demand. There are also opportunities to find new pockets of investor interest. For example, green RMBS is very much a current talking point. Part of the reason is that this product may tap into new mandates that may not invest in traditional RMBS.

“THE RESILIENCE AND GROWTH OF THE NONBANK ORIGINATOR SECTOR HAS BEEN IMPRESSIVE, PARTICULARLY COMING OUT OF THE FINANCIAL CRISIS. THIS HAS HELPED TO OFFER DIVERSITY OF PRODUCT BOTH TO THE BORROWER MARKET AS WELL AS TO ASSET-BACKED SECURITIES INVESTORS.” KEVIN LEE MACQUARIE BANK

42 · Australian Securitisation Journal | Issue 15_2019

There is also an opportunity to increase demand by introducing greater flexibility around capital structures. Under APS 120, ADIs can issue bullet-style transactions. This makes cross-currency hedging less complicated and opens up the possibility of issuing non-Australian dollar tranches to appeal to offshore investor demand. ◆ ELLWOOD It would be great if we could see a return of the level of offshore demand for Australian RMBS we experienced in the years prior to the financial crisis. Increased investor demand and associated secondary-market liquidity would have a positive impact on pricing for issuers. The key difference today relative to the pre-crisis period is that the investor base is no longer short-term arbitrage vehicles like commercial-paper conduits and structured-investment vehicles. Instead it comprises real-money investors including those from the growing investor region of Asia. ◆ LEE When we are talking about offshore demand it is worth noting that there are potentially two sources of Australian dollar demand from offshore investors: existing pools of Australian dollars held offshore and offshore investors that can efficiently swap their home currency into Australian dollars at an all-in cost that results in an attractive investment on a relative-value basis. For the first group, if they are not already investing in Australian dollar securitisation an education piece may be helpful. The second group is a larger universe that may be widened if Australian structures can create more certain repayment profiles to make hedging easier, for instance through the creation of bullet bonds or set-amortisation notes. ◆ TI We have seen issuers spend a lot of time and resources marketing to offshore investors. For instance, over the past two years Japanese investors have increasingly become a staple of the Australian RMBS industry. We need issuers to continue marketing offshore and hopefully replicating the success we have observed with Japanese investors. ◆ SAMSON Putting everything together, it is clear that we have to continue to work on educating investors about the securitisation product. We know it is more complex than some other fixed-income products, but it has performed well over a very long period, and the transactions are well structured and backed by good pools of assets. We need to do more with superannuation funds and other investors to show that our product is an attractive

investment, and also focus on how we can attract self-managed superannuation funds and other smaller investors – including making it easy for them to invest. The other piece is that we need to listen to what investors want and try to build it. This means tenor, price, currency and even finding ways to attract further environmental, social and governance (ESG) investment. ◆ SEROV The banking sector is going through a period in which origination volume is constrained by regulatory action and the need to adjust its processes. The result has been an increase in origination and securitisation from nonbank lenders in the last two years. We expect this to be the case next year as well. We have seen a step up in interest from foreign investors in the last 18 months, particularly out of Asia but also from Europe. This supports issuance. Last year was a record year, and while this year will likely be a little slower it should still be close to a record for nonbanks. We don’t expect major changes to market infrastructure or the way it operates in 2019.

FUTURE CASTING ASJ What might be the key developments in

Australian securitisation in the coming years? How will these affect the shape of the market? ◆ KANARIS

Nonbanks continue to grow in size and relevance and I expect these issuers to become a proportionately larger part of the issuance landscape. This could also drive more transactions containing offshore-currency tranches, the likes of which Resimac and Pepper Group currently issue in the US, and Liberty Financial in Europe. ◆ TI Australian issuers continue to look offshore in search of incremental investor demand. However, not all offshore investors are comfortable investing in Australian dollar securities. Increasingly, we have seen issuers opt for US dollar or euro denominated securities, despite the cost of crosscurrency swaps. I think we will see more of this in future. ◆ LEE The recent increased activity by large, international private-equity firms investing in various Australian lending platforms has been an interesting development. I think we may see more innovation in funding solutions spurred on by this, either within securitisation structures or as alternative strategies such as whole-loan sales and futureflow purchase arrangements. This evolution will be helped by

“THE MARKET IS MORE MATURE IN THE MEZZANINE SPACE WITH INVESTORS INCREASINGLY COMFORTABLE PARTICIPATING. THIS IS IMPORTANT BECAUSE SUBORDINATED POSITIONS ALSO NEED FUNDING, PARTICULARLY FOR NONBANKS AND FOR ADIs LOOKING FOR CAPITALRELIEF DEALS.” JAMES KANARIS WESTPAC INSTITUTIONAL BANK

ROUNDTABLE

“THE KEY DIFFERENCE TODAY RELATIVE TO THE PRE-CRISIS PERIOD IS THAT THE INVESTOR BASE IS NO LONGER SHORT-TERM ARBITRAGE VEHICLES LIKE COMMERCIAL-PAPER CONDUITS AND STRUCTURED-INVESTMENT VEHICLES. INSTEAD IT COMPRISES REAL-MONEY INVESTORS INCLUDING THOSE FROM THE GROWING INVESTOR REGION OF ASIA.” ROD ELLWOOD PERPETUAL CORPORATE TRUST

a growing appetite of some institutional investors to look at nonstandard transactions. ◆ KANARIS In addition, there is now, and there will continue to be, a focus on prepayment rates. To address these issues, I expect we will see issuers continue to put structures in place to help mitigate extension risk. Longer term, the market is likely to benefit from digitisation. This will cover aspects from how bonds are settled to collateral reporting and analytics. Over time, this will make placement more efficient and provide deeper insights for the market. But equally I expect human interactions – like investor meetings – to remain a key engagement tool. ◆ MINEEFF This point about digitisation is the biggest potential change in the way deals are managed and distributed. If a blockchain technology solution was implemented that in some way led not just to administrative efficiencies in the way the market operated but also fostered an active secondary market and the involvement of a broader range of investors and issuers, it would elevate the product to another level. ◆ ELLWOOD The advances we are seeing in technology are delivering cost-effective and efficient services to the consumer and the introduction of digital end-to-end platforms will deliver scalability and security to issuers and service providers. The recent World Bank blockchain bond issue showcases the efficiencies that blockchain can offer Kangaroo issuers. Technological solutions and new fintech providers may disrupt the traditional methods we currently use to market, originate, credit-assess, underwrite, process, service, fund and report on all forms of consumer lending. It will be challenging for new entrants to compete with the established banks and nonbanks, but the challenge has certainly been accepted. Something that’s worth looking out for is the possibility of one of the “FAANGs” [Facebook, Amazon, Apple, Netflix, Google] emerging as a major provider of consumer finance in competition to the major banks. We could also see the re-emergence of the traditional offshore banks, as well as new Chinese banks, as consumer lenders in our domestic market. ◆ SAMSON Hopefully all manual parts of securitisation are gone in 10 years’ time, and we even have robots to read and negotiate our transaction documents and the like for us! I am sure blockchain will play an important part. ◆ VOJVODIC Technology will certainly play a larger part in the market. How mortgages and other consumer products are 44 · Australian Securitisation Journal | Issue 15_2019

written will change. From a rating-agency perspective, we need to look at how this affects the way we look at mortgages and other assets and whether it changes underlying credit risk. Technology and new products in the consumer space will be another development we may see. Credit is being provided differently and to a broader range of consumers. This is coming through now, but whether it hits the market and in what way is unclear. ◆ CONEYBEARE Anything paper-based or involving manual processes will inevitably be replaced with great innovative tools. The adoption of technological developments such as machine learning, blockchain and AI will likely mean time spent manually compiling data will be a thing of the past. Data and technological developments are fundamentally going to change how and what people consume, how we understand customers and credit, and how we can analyse and understand how performance might look. This will also affect what our teams look like and what our relevant skillsets are. Fintech in all its guises is very interesting and will likely have a big impact on lending markets. The ability for this to change the way lending products are managed, processed and underwritten is significant. We think the development of green securitisation will be an increasingly prominent part of the market, particularly as ESG is given more weight or consideration in investment decisions. Investor demand for fixed-income ESG finance has grown globally and bred new financial products, a trend we expect to continue. Regulators, which are focused on meeting global commitments, are also emphasising ESG-related disclosure and embedding such concepts into mainstream capital markets. ◆ METCALF The securitisation market is mature. Innovation and change is occurring in the interface between lender and borrower and in distribution channels rather than in the securitisation structures that are tied to regulatory and ratingagency rules. There will be efficiencies in documentation and capital-markets transaction execution. Data analytics will drive risk decision making, the role of mortgage insurance should be resolved and property may be used less as a wealth-creation tool. We will know whether a 20-minute mortgage approval is possible and whether institutional investors will directly fund mortgages. Hopefully we will also have fewer than the dozen or so current inquiries into financial services. ■

MEMBER PROFILES

ASF MEMBER AND SECURITISATION ISSUER PROFILES The Australian Securitisation Forum (ASF) is pleased to share a directory of its key member institutions and Australasian securitisation issuers. A range of members of the association and all member issuing entities were invited to submit a profile. Member profiles begin on this page and issuer profiles begin on p53.

he ASF is self-funded through annual membership fees and other revenue sources. Membership is corporate-based and open to participants in the securitisation and covered-bond markets. The key benefits of membership are building industry consensus, advocacy, education, improving market standards and practices, and networking. As an association, the ASF is the forum for the industry to form its collective opinion on policy issues of broad importance. Through its subcommittees and membership, relevant local and international issues with potential impact

on the market are identified and discussed among the industry. Membership of the ASF offers a unique opportunity to participate meaningfully in shaping the future of securitisation. Staff of member firms who have the required experience are eligible to join ASF subcommittees and working groups. These groups work to deliver strategic direction to ASF policy-development activities. Members can share and develop their views on policy issues. ASF policy positions are developed on the advice of these committees, with oversight by the national committee.

ALLENS

ANZ

llens has led and been involved in many industryleading securitisation and structured-finance transactions in Australia and Asia, and regularly advises on innovative transactions for a variety of asset classes. The firm’s years of industry experience and international alliance with Linklaters mean it can anticipate the issues likely to arise in any transaction and deal with them commercially and efficiently. Allens provides clear thinking in a changing regulatory landscape and dynamic market.

◆ CONTACT DETAILS

Benjamin Downie Partner +61 2 9230 5114 benjamin.downie@allens.com.au www.allens.com.au

NZ’s capital-markets team provides dynamic access to global pools of liquidity via a fully integrated, superregional debt-capital-markets offering encompassing bonds, loans and hybrid transactions. The bank’s regional positioning, strong balance sheet and commitment to supporting clients’ transactions underpin the team’s awardwinning funding solutions. Backed by ANZ’s double-A-category credit rating and robust balance sheet, the team’s strength is in tailoring funding solutions – including syndicated loans, bonds and structureddebt transactions – specifically for clients, that provide certainty of execution and satisfy key price, structure and distribution metrics. ◆ CONTACT DETAILS

James Darcy Partner +61 3 9613 8516 james.darcy@allens.com.au

Graham Metcalf Global Head of Structured Capital Markets +61 2 8937 8606 graham.metcalf@anz.com www.anz.com/institutional 45

MEMBER PROFILES

ASHURST

AET

◆ CONTACT DETAILS

he Ashurst securitisation team is one of the largest and deepest in Australia. The team has had market leading roles in 2018 including in the establishment of a number of new securitisation programmes, as well as advising offshore and domestic financiers. Highlights have included establishing a A$1 billion autos master-trust programme for Custom Fleet and advising on a number of new fintech platforms, including warehouses for Judo Capital, Get Capital, OnDeck and Brighte, as well as a number of M&Arelated transactions in the space. The Ashurst securitisation team is connected to a network of specialists in its offices in New York, London and continental Europe and Asia – including Singapore, Japan, Hong Kong and China.

Jennifer Schlosser Partner +61 2 9258 5753 jennifer.schlosser@ashurst.com www.ashurst.com

Jamie Ng Partner +61 2 9258 6753 jamie.ng@ashurst.com

s one of Australia’s most experienced trustee companies, Australian Executor Trustees (AET) has been providing professional trustee services for more than 130 years. AET Corporate Trust is a leading provider of corporate-trust services to the Australian financial-services industry. It provides a range of trustee and agency services to the debt capital markets including securitisation, debt financing and loan portfolio management.

Glenn White Senior Manager, Business Development +61 2 9028 5922 glenn.white@aetlimited.com.au www.aetlimited.com.au

BLOOMBERG

BNY MELLON

loomberg’s collateral-analytics, scenario and creditanalytics tools empower investors quickly to determine the profile of a portfolio and understand where the true risk in securitised mortgage investments lies. Bloomberg analytics power Bloomberg’s portfolio and position-keeping systems and can also be accessed programmatically to feed third-party applications. Bloomberg has also partnered with price makers across Australia to aggregate pricing on a single platform. In addition, it provides clients with independent pricing of Australian RMBS alongside topical research and indices on the Australian real-estate market.

◆ CONTACT DETAILS

Robin Pickover Market Specialist +61 2 9777 8688 rpickover@bloomberg.net www.bloomberg.com

46 · Australian Securitisation Journal | Issue 15_2019

ince establishing its Australian office in 1975, BNY Mellon has been a leading provider of corporate-trust services to the Australian debt capital markets. These are bolstered by a solid capital base and credit ratings, while the firm’s global footprint and expertise deliver a full range of issuer and investor services. Scuritisation services are further strengthened by a robust analytics platform using global technology to enable bespoke modelling while reducing risk. At the end of June 2018, BNY Mellon Corporate Trust served as trustee, paying agent or both on more than 53,000 debt-related issues globally. The business administers a wide array of assets and types of programmes to a variety of clients in numerous industries.

Michael Thomson Group Manager, Corporate Trust Australia +61 2 9260 6088 michael.thomson@bnymellon.com www.bnymellon.com/au/en/index.jsp

CLAYTON UTZ

COMMONWEALTH BANK

layton Utz has a long history in the domestic and international securitisation markets, being there from the beginning and maintaining a leading reputation with a band-one ranking in Chambers Global. Its leading practitioners have advised on many of the significant securitisation deals in recent years and have also played a key role in the development of Australia’s covered-bond market. Clayton Utz has a strong sponsor client base and significant experience acting for a range of participants across all asset classes. The Clayton Utz team is an active participant in the work of the ASF including sitting on the national committee, chairing subcommittees, lecturing and assisting the ASF in its responses to regulatory changes. ◆ CONTACT DETAILS

Andrew Jinks Partner +61 2 9353 5818 ajinks@claytonutz.com www.claytonutz.com

Sonia Goumenis Partner +61 2 9353 4378 sgoumenis@claytonutz.com

ommonwealth Bank of Australia is Australia’s leading financial institution, with total assets of A$975 billion at 30 June 2018. The group is rated AA- by S&P Global Ratings and is the 13th-largest bank in the world by market capitalisation. The bank is headquartered in Sydney and has a global presence throughout Asia, New Zealand, the UK and North America. The institutional banking and markets division provides capital-raising, risk-management and transactional-banking solutions to the group’s institutional clients. The division’s approach is underpinned by rich analytics, insights from industry experts, innovative technology and a deep commitment to building long-lasting relationships.

◆ CONTACT DETAILS

Rob Verlander Executive Director, Debt Markets Securitisation +61 2 9118 1228 verlanro@cba.com.au www.commbank.com.au/debtmarkets

DELOITTE

DEUTSCHE BANK

◆ CONTACT DETAILS

nderstanding the needs of clients and responding to them quickly with consistent, knowledgeable advice and strategic ideas is the cornerstone of the clientservice philosophy at Deloitte. Deloitte’s market-leading securitisation practice has global reach and capabilities which allow it to leverage work performed in other jurisdictions and to access the most up-to-date market practices from around the world. Deloitte’s designated Australian securitisation advisory team works closely with many industry participants on a range of projects including issuance, debt advisory, due diligence and system-advisory projects – including its proprietary specialist securitisation software, ABS Suite.

Heather Baister Partner, Audit and Assurance +61 2 9322 591/ +61 409 696 886 hebaister@deloitte.com.au www.deloitte.com/au

eutsche Bank is Germany’s leading bank, with a strong position in Europe and a significant presence in the Americas and Asia Pacific. The global securitisation group combines an ability to commit capital with an integrated approach to the debt and equity needs of issuers and investors. The Australian team has been a market leader, providing innovative client solutions and service, for more than a decade.

Kelly Mantova Director and Head of Asset Backed Securities +61 2 8258 3159 kelly.mantova@db.com www.db.com 47

MEMBER PROFILES

EQUITY TRUSTEES

ETICORE

◆ CONTACT DETAILS

quity Trustees was established in 1888 to provide independent and impartial trustee and executor services to help families in Australia protect their wealth. As Australia’s leading specialist trustee, it offers a diverse range of services to individuals, families and corporate clients. The corporate trustee services division is responsible for more than A$70 billion of funds under management. Equity Trustees provides responsible-entity and trustee services to more than 100 leading local and international investment managers and super funds. It also provides a full range of structured-finance trustee services for international investment managers and sponsors.

James Connell Senior Manager, Structured Finance +61 2 9458 5509 / +61 428 526 863 jconnell@eqt.com.au www.eqt.com.au

ticore provides corporate trustee, trust management, back-up servicing, RBA reporting, trust accounting and associated services to meet clients’ securitisation and structured debt requirements, with the aim of providing exceptional service, quality solutions, and deep experience. Eticore works with clients to create flexible and bespoke solutions, using a fresh approach and the most up-to-date technology while playing a dependable fiduciary role. The team is experienced and technically proficient, and the process is transparent from pricing to service levels, providing certainty for issuers and investors. Eticore understands all the pain points, which is why it designed a solution that is easier and more agile, and tailored specifically to clients’ needs.

Belinda Smith Chief Executive Officer +61 2 8278 9520 belinda.smith@eticore.com.au www.eticore.com.au

FITCH RATINGS

GENWORTH

itch Ratings (Fitch) is a leading provider of credit ratings, commentary and research. Dedicated to providing value beyond the rating through independent and prospective credit opinions, Fitch offers global perspectives shaped by strong local experience and credit-market expertise. The context, perspective and insights Fitch provides has helped investors make important credit judgements with confidence. ◆ CONTACT DETAILS

ANALYTICAL Natasha Vojvodic Head of Australia and New Zealand Structured Finance +61 2 8256 0350 natasha.vojvodic@fitchratings.com https://www.fitchratings.com/site/australia BUSINESS & RELATIONSHIP MANAGEMENT Spencer Wilson Structured Finance Business and Relationship Management +61 2 8256 0320 spencer.wilson@fitchratings.com www.fitchratings.com 48 · Australian Securitisation Journal | Issue 15_2019

enworth is a leading provider of LMI in Australia. It also provides tailored risk and capital-management solutions for lender customers in the Australian residentialmortgage market that complement its traditional LMI product offering. Genworth believes the provision of LMI to lenders has contributed to comparatively high levels of Australian home ownership and residential-mortgage accessibility, supporting the housing market in Australia. Genworth has commercial relationships with more than 100 lenders across Australia. Many of these relationships have spanned decades.

◆ CONTACT DETAILS

Brad Dean Acting Head of Strategy and Innovation +61 2 8248 2520 brad.dean@genworth.com www.genworth.com.au

HERBERT SMITH FREEHILLS

INTEX

dvising clients across the globe, Herbert Smith Freehills’ securitisation and structured-finance specialists are at the forefront of many first-of-a-kind transactions, developing innovative new financings that reflect the consistently changing markets in which clients work. Herbert Smith Freehills offers comprehensive multijurisdictional coverage, advising arrangers and lead managers, corporate issuers, originators, credit enhancers, trustees, rating agencies and other market participants on a range of products and asset classes. ◆ CONTACT DETAILS

Patrick Lowden Partner +61 2 9225 5647 patrick.lowden@hsf.com Vinh Huynh Executive Counsel +61 2 9225 5196 vinh.huynh@hsf.com

Laura Sheridan Mouton Partner +61 2 9225 5004 laura.mouton@hsf.com

www.herbertsmithfreehills.com

ntex is the leading one-stop provider of cash-flow models and analytics for the global structured-finance industry. Intex has accurately modelled and maintains more than 30,000 CMBS, RMBS, ABS and CLO deals issued in the US, Europe, China, Australia, Japan and elsewhere, representing close to 100 per cent coverage across these asset sectors and regions. Intex is relied upon by many hundreds of arrangers, investors, issuers and other major market participants that see an advantage in the completeness, accuracy and timeliness of Intex’s models and updates in support of trading, portfolio management and risk-management applications. Intex’s applications include INTEXcalc for single-security and portfolio analysis and cash-flow stress-testing, the INTEX Subroutine API for system builders, and INTEX DealMaker for structuring new deals. Intex is an independent, objective and privately held company with offices in Massachusetts, London and Shanghai.

◆ CONTACT DETAILS

www.intex.com

J.P. MORGAN

KING & WOOD MALLESONS

.P. Morgan’s corporate and investment bank is a global leader across banking, markets and investor services. The world’s most important corporations, governments and institutions entrust the firm with their business in more than 100 countries. J.P. Morgan is a global leader in credit distribution, balance-sheet solutions and securitised products across commercial and consumer asset classes.

◆ CONTACT DETAILS

Anthony Hermann Managing Director, Spread Markets +61 2 9003 8100 anthony.hermann@jpmorgan.com Stephen Magan Executive Director, Spread Markets +61 2 9003 8362 stephen.s.magan@jpmorgan.com www.jpmorgan.com.au

s the first and only global law firm to be headquartered in Asia, King & Wood Mallesons (KWM) is connecting Asia to the world and the world to Asia. Strategically positioned in the world’s growth markets and financial capitals, its securitisation team has acted on almost every landmark securitisation transaction in the Australian market and an increasing number in Asia. KWM’s clients value its global network, legal expertise in key disciplines and strong relationships with regulators and market participants. Whether an arranger, lender, originator, trustee or rating agency, KWM can help anticipate and avoid execution, regulatory and compliance risks. ◆ CONTACT DETAILS

Ian Edmonds-Wilson Partner, Banking and Finance +61 2 9296 2520 ian.edmonds-wilson@au.kwm.com www.kwm.com 49

MEMBER PROFILES

MACQUARIE GROUP

MINTERELLISON

acquarie Group (Macquarie) is a global diversified financial group that provides a range of services to clients including asset management and finance, banking, advisory and risk and capital solutions across debt, equity and commodities. Founded in 1969, Macquarie employs more than 14,000 people in more than 25 countries. In fixed-income markets, Macquarie’s commodities and global-markets group focuses on providing warehousing, structuring and distribution of securitised debt for clients in Australia and Europe. It also provides secondary-market liquidity as well as interest-rate risk-management services via structured solutions and derivative-based products.

◆ CONTACT DETAILS

Kevin Lee Division Director, Debt Origination and Structuring +61 2 8232 8577 kevin.lee@macquarie.com www.macquarie.com/au/corporate

s one of Australia’s largest independent law firms with connections to New Zealand, Beijing, Hong Kong and London, MinterEllison’s capital-markets team is at the forefront of the Asia-Pacific region and globally. The team is recognised for its role in leading some of the industry’s most innovative transactions with particular expertise in the structuring of complex debt instruments. The firm’s securitisation practice acts for major industry participants across asset classes, including RMBS, auto receivables, lease receivables and trade receivables. MinterEllison is also actively engaged with clients in preparing and responding to regulatory developments which are having a major impact on the securitisation industry.

John Elias Partner +61 2 9921 4115 john.elias@minterellison.com www.minterellison.com

MOODY’S

MITSUBISHI UFJ FINANCIAL GROUP

oody’s is an essential component of the global capital markets, providing credit ratings, research, tools and analysis that contribute to transparent and integrated financial markets. Moody’s Corporation (NYSE: MCO) is the parent company of Moody’s Investors Service – which provides credit ratings and research covering debt instruments and securities – and Moody’s Analytics – which offers leadingedge software, advisory services and research for credit and economic analysis, and financial risk management. The corporation, which reported revenue of US$4.2 billion in 2017, employs approximately 12,300 people worldwide and maintains a presence in 42 countries. ◆ CONTACT DETAILS

Jim Metaxas Director and Product Specialist +61 2 9270 1404 jim.metaxas@moodys.com www.moodys.com 50 · Australian Securitisation Journal | Issue 15_2019

itsubishi UFJ Financial Group (MUFG) is one of the world’s leading financial groups. Headquartered in Tokyo and with more than 360 years of history, MUFG has a global network in excess of 1,800 locations in more than 50 countries. The group offers services including commercial and trust banking, securities, credit cards, consumer finance, asset management and leasing. MUFG aims to be the world’s most-trusted financial group through close collaboration among its operating companies, flexibly responding to all the financial needs of its customers, serving society, and fostering shared and sustainable growth for a better world. MUFG’s shares trade on the Tokyo, Nagoya and New York stock exchanges. ◆ CONTACT DETAILS

John Stormon Managing Director and Head of Securitisation, Australia and New Zealand +61 2 9296 1381 john_stormon@au.mufg.jp www.mufg.jp/english

Haan Ti Head of ABS, Australia and New Zealand +61 2 8598 1811 haan.ti@mufgsecurities.com

NATIONAL AUSTRALIA BANK

NATIXIS

◆ CONTACT DETAILS

ational Australia Bank (NAB)’s operations in Asia, Australia, New Zealand, the US and UK serve more than 11.5 million banking and wealth-management clients, providing access to international financial markets and specialised funding, liquidity, investment, asset services and risk-management capabilities. A committed and leading market participant, NAB’s team has cemented its position as a key arranger and lead manager of capital-market and balance-sheet deals through continued innovation and a deep understanding of issuer and investor client needs. This has placed NAB at the top of the securitisation league tables (KangaNews Q1-3 2018) and it has also been a repeat winner of the Australian Securitisation House of the Year award (KangaNews Awards 2012-17).

Sarah Samson Head of Securitisation Origination +61 3 8641 2997 sarah.samson@nab.com.au www.nab.com.au

atixis is the corporate, investment, asset-management, insurance and financial-services arm of Groupe BPCE, with 31 million clients in two retail banking networks: Banque Populaire and Caisse d’Epargne. Natixis has a range of areas of expertise organised into three main business lines: corporate and investment services, investment solutions and insurance, and specialised financial services. A global player, Natixis has its own client base of companies, financial institutions and investors as well as the client base of individuals, professionals and SME businesses of Groupe BPCE’s banking networks.

Fabrice Guesde Oscar Austin Head of GSCS Asia Pacific Vice President, Global Markets +852 3900 8451 +61 2 8063 1711 fabrice.guesde@natixis.com oscar.austin@natixis.com www.apac.cib.natixis.com/australia

PERPETUAL CORPORATE TRUST

PWC AUSTRALIA

erpetual is an ASX-listed, independent and diversified financial-services company. Across three businesses – Perpetual Investments, Perpetual Private and Perpetual Corporate Trust – its focus is on protecting and growing clients’ wealth with an aim to deliver consistently over time. Perpetual Corporate Trust is a leading provider of corporate fiduciary services to the Australian securitisation industry, administering more than A$640 billion on behalf of its clients at the end of 2017. As the Australian data warehouse, Perpetual provides the link between issuers, the RBA and the investment community, supporting standardisation, transparency and comparability of the securitisation market. ◆ CONTACT DETAILS

Richard McCarthy General Manager, Sales and Product +61 2 9229 3843 richard.mccarthy@perpetual.com.au www.perpetual.com.au

wC Australia is a member of PwC, a network of global firms in 158 countries committed to delivering quality services in assurance, advisory, legal and tax. PwC has a specialist structured-finance team globally, including dedicated teams in the Asia-Pacific region. The team focuses on supporting clients in running their programmes, helping organisations to solve business issues and identifying and maximising opportunities. PwC’s specialisation, technologybased innovation and digitally fit capabilities enables it to co-create solutions with clients for their sector of interest.

◆ CONTACT DETAILS

Sarah Hofman Rob Spring Partner Partner +61 2 8266 2231 +61 2 8266 1643 sarah.hofman@pwc.com rob.spring@pwc.com Sabi Gordos Jade Chong Director Director +61 2 8266 1220 +61 2 8266 1300 sabi.gordos@pwc.com jade.chong@pwc.com www.pwc.com.au/financial-services.html 51

MEMBER PROFILES

RBC

S&P GLOBAL RATINGS

he most significant corporations, institutional investors, asset managers, private-equity firms and governments around the globe recognise RBC Capital Markets (RBCCM) as an innovative, trusted partner with in-depth experience in capital markets, banking and finance. Its established securitisation platform specialises in structuring, warehousing and distribution across the US, Canada, Europe, Asia and Australia. RBCCM is a leading conduit provider across multiple asset classes, offers committed balance-sheet support for warehouse financing, and its extensive term ABS structuring and placement expertise is supported by dedicated global distribution, trading and derivatives capabilities. ◆ CONTACT DETAILS

Jennifer Hellerud Director and Head of Securitisation +61 2 9033 3238 jennifer.hellerud@rbccm.com www.rbccm.com

Simone Johnson Vice President, Securitisation +61 2 9033 3360 simone.johnson@rbccm.com

WESTPAC INSTITUTIONAL BANK

estpac Institutional Bank (WIB) delivers a broad range of financial products and services to commercial, corporate, institutional and government customers with connections to Australia and New Zealand. WIB operates through dedicated industry-relationship and specialist product teams, with expert knowledge in financing, transaction banking, and financial and debt capital markets. Customers are supported throughout Australia as well as via branches and subsidiaries located in New Zealand, the US, UK and Asia. WIB works in an integrated way with all Westpac group’s divisions in the provision of more complex financial needs including across foreign-exchange and fixed-interest solutions. ◆ CONTACT DETAILS

Craig Parker Executive Director and Head of Structured Finance +61 2 8254 9116 cparker@westpac.com.au www.westpac.com.au/corporate-banking 52 · Australian Securitisation Journal | Issue 15_2019

&P Global Ratings (S&P) is the world’s leading provider of independent credit ratings. Its ratings are essential to driving growth, providing transparency and helping educate market participants so they can make decisions with confidence. S&P has more than a million credit ratings outstanding. It offers an independent view of the market built on a combination of broad perspective and local insight. S&P provides opinions and research that helps market participants gain independent information to help support the growth of transparent, liquid debt markets worldwide. S&P Global Ratings is a division of S&P Global, which provides essential intelligence for individuals, companies and governments to make decisions with confidence.

◆ CONTACT DETAILS

Paul Potter Lead, Market Outreach, Pacific +61 2 9255 9839 paul.potter@spglobal.com www.spglobal.com/ratings

ISSUER PROFILES

AMP BANK AUSTRALIAN ADI SECURITISATION PROGRAMME NAME

ANZ BANKING GROUP YES

AUSTRALIAN ADI

PROGRESS

SECURITISATION PROGRAMME NAME

USE O F SE CU RI T I SAT IO N TYPE OF SECURITISATION ISSUED

AUSTRALIAN FINANCE GROUP YES

AUSTRALIAN ADI

KINGFISHER

SECURITISATION PROGRAMME NAME

AFG

USE OF SECURITISATION

U S E O F S ECURITISATION PRIME RMBS

TYPE OF SECURITISATION ISSUED

PRIME RMBS

22%

PROPORTION OF OUTSTANDING WHOLESALE FUNDING SOURCED VIA SECURITISATION

1.1%

PROPORTION OF OUTSTANDING WHOLESALE FUNDING SOURCED VIA SECURITISATION

50%

NUMBER OF SECURITISATIONS ISSUED

TOTAL VOLUME ISSUED

A$20BN

TOTAL VOLUME ISSUED*

A$6.5BN

TOTAL VOLUME ISSUED

A$1.9BN

TOTAL DOMESTIC VS OFFSHORE ISSUANCE

78% DOMESTIC 22% OFFSHORE

TOTAL DOMESTIC VS OFFSHORE ISSUANCE*

48% DOMESTIC 52% OFFSHORE

TOTAL DOMESTIC VS OFFSHORE ISSUANCE

100% DOMESTIC

OUTSTANDING VOLUME OF SECURITISED ISSUES

A$4.9BN

OUTSTANDING VOLUME OF SECURITISED ISSUES

A$760M

PRIME RMBS

TYPE OF SECURITISATION ISSUED

PROPORTION OF OUTSTANDING WHOLESALE FUNDING SOURCED VIA SECURITISATION

ormed in 1849, AMP Group is Australia and New Zealand’s leading independent wealthmanagement company, with an expanding international investmentmanagement business and a growing retail-banking business in Australia. AMP Bank is an Australian retail bank participating in residential mortgage lending, and retail and platform deposits. AMP Bank’s mission is to help customers with their goals for life, providing them with targeted retailbanking solutions focused on wealth creation in support of their goals. AMP Bank also provides financing to AMP’s financial-planning businesses. AMP Bank’s products and services enable it to be relevant over a wider set of financial goals, earlier in the customer’s life cycle and with higher customer interaction. AMP Bank distributes through brokers, advisers and direct via phone and internet banking. ◆ contact details

Gwenneth O’Shea Head of Securitisation +61 2 9257 5823 gwenneth_oshea@amp.com.au www.amp.com.au/securitisation

OUTSTANDING VOLUME A$1.2BN** OF SECURITISED ISSUES *Excluding internal securitisations. Reported values are based on initial amounts securitised at the time of each securitisation. ** As at 24 September 2018.

NZ Banking Group (ANZ) is one of the four major banking groups headquartered in Australia. ANZ provides a broad range of banking and financial products and services to retail, small business, corporate and institutional clients in Australia, New Zealand and the AsiaPacific region. The bank began its Australian operations in 1835, its New Zealand operations in 1840 and has been active in Asia since the 1960s.

◆ contact details

Scott Gifford Head of Debt Investor Relations +61 3 8655 5683 scott.gifford@anz.com Mostyn Kau Head of Group Funding +61 3 8655 3860 mostyn.kau@anz.com John Needham Head of Structured Funding +61 2 8037 0670 john.needham@anz.com www.anz.com

ustralian Finance Group (AFG) is one of Australia’s leading companies when it comes to financial solutions. Founded in 1994, AFG has grown to become one of the largest mortgage-broking groups in Australia with a loan book of more than A$145 billion. Listed on the Australian Securities Exchange in 2015, AFG has in excess of 2,950 brokers across Australia distributing more than 4,000 finance products supplied by AFG’s panel of more than 50 lenders. AFG leverages its tier-one technology platform proactively to manage its relationship with lenders, brokers and customers. AFG commenced offering its own securitisable home loans in 2007. These loans are funded by multiple warehouses and term transactions.

◆ contact details

Ben Jenkins Chief Financial Officer +61 8 9420 7035 ben.jenkins@afgonline.com.au Toni Blundell Manager, Securitisation +61 8 9420 7811 toni.blundell@afgonline.com.au www.afgonline.com.au 53

ISSUER PROFILES

AUSWIDE BANK AUSTRALIAN ADI SECURITISATION PROGRAMME NAME

BANK OF QUEENSLAND BEYOND BANK YES ABA TRUST

US E O F SE CU RI T IS A T IO N TYPE OF SECURITISATION ISSUED

PRIME RMBS

PROPORTION OF OUTSTANDING WHOLESALE FUNDING SOURCED VIA SECURITISATION

58%

NUMBER OF SECURITISATIONS ISSUED

TOTAL VOLUME ISSUED

A$3.7BN

TOTAL DOMESTIC VS OFFSHORE ISSUANCE

100% DOMESTIC

OUTSTANDING VOLUME OF SECURITISED ISSUES

A$447M

uswide Bank became Australia’s 10th, and Queensland’s third, Australian-owned bank to be listed and traded on the Australian Securities Exchange, in 2015. Auswide Bank operates 23 branches from Cairns in north Queensland to Brisbane in the south east. Auswide Bank has extensive operations across Australia via third-party arrangements. Auswide Bank has Australian credit and financial-services licences issued by the Australian Securities and Investments Commission. It is an authorised deposit-taking institution supervised by the Australian Prudential Regulation Authority. The bank offers a range of personaland business-banking products and services issued directly or in partnership with leading service providers via branches, strategic relationships and online and digital channels.

◆ contact details

Dale Hancock Group Treasurer +61 7 4150 4025 dhancock@auswidebank.com.au www.auswidebank.com.au 54 · Australian Securitisation Journal | Issue 15_2019

AUSTRALIAN ADI

YES

AUSTRALIAN ADI

YES

SECURITISATION PROGRAMME NAMES

REDS (RMBS), REDS EHP (ABS), IMPALA (ABS)

SECURITISATION PROGRAMME NAME

BARTON

U S E O F SECURITISATION

USE OF SECURITISATION TYPES OF SECURITISATION ISSUED

PRIME RMBS

TYPES OF SECURITISATION ISSUED

PRIME RMBS, ABS

100%

PROPORTION OF OUTSTANDING WHOLESALE FUNDING SOURCED VIA SECURITISATION

PROPORTION OF OUTSTANDING FUNDING SOURCED VIA SECURITISATION

NUMBER OF SECURITISATIONS ISSUED

TOTAL VOLUME ISSUED

A$1.1BN

TOTAL VOLUME ISSUED

A$24.4BN

TOTAL DOMESTIC VS OFFSHORE ISSUANCE

100% DOMESTIC

TOTAL DOMESTIC VS OFFSHORE ISSUANCE

92% DOMESTIC 8% OFFSHORE

OUTSTANDING VOLUME OF SECURITISED ISSUES

A$550M*

OUTSTANDING VOLUME OF SECURITISED ISSUES

A$3.6BN

*All ﬁgures as at 31 August 2018.

ank of Queensland (BOQ) is a public company incorporated with limited liability under the laws of Australia. BOQ is domiciled in Australia, is listed on the Australian Securities Exchange and is regulated by the Australian Prudential Regulation Authority as an authorised deposittaking institution. The bank had total assets under management of A$53 billion as at 31 August 2018.

◆ contact details

Tim Ledingham Treasurer +61 7 3212 3342 tim.ledingham@boq.com.au James Shaw Head of Funding +61 7 3212 3835 james.shaw@boq.com.au www.boq.com.au

* Excluding internal securitisation.

eyond Bank is one of the largest and most geographicallydiverse customer-owned banks in Australia, with more than 245,000 customers and more than 40 branches across New South Wales, South Australia, Western Australia and Australian Capital Territory. At the end of June 2018, its total assets exceeded A$5.8 billion. Profits are used to provide award-winning service and value across a wide range of banking and financial products. Beyond Bank has won a host of industry awards including in 2017 and 2018. One was Best Financial Institution in Corporate Social Responsibility at the Australian Retail Banking Awards. It was also the first bank in Australia to achieve ‘B Corp’ certification. ◆ contact details

Tony MacGillivray Treasurer +61 8 8205 8853 tmacgillivray@beyondbank.com.au Deanna Martin Senior Securitisation Analyst +61 8 8205 8613 demartin@beyondbank.com.au www.beyondbank.com.au

BLUESTONE GROUP AUSTRALIAN ADI

SECURITISATION PROGRAMME NAMES

SAPPHIRE, EMERALD

USE O F SE CU RI T I SA T IO N TYPES OF SECURITISATION ISSUED

RMBS, REVERSE MORTGAGE

PROPORTION OF OUTSTANDING WHOLESALE FUNDING SOURCED VIA SECURITISATION

85%

NUMBER OF SECURITISATIONS ISSUED

TOTAL VOLUME ISSUED

A$7.6BN

TOTAL DOMESTIC VS OFFSHORE ISSUANCE

90% DOMESTIC 10% OFFSHORE

OUTSTANDING VOLUME OF SECURITISED ISSUES

A$1.5BN

luestone Group (Bluestone) provides near-prime and specialist mortgage solutions to borrowers falling outside bank criteria. Established in Sydney in 2000, Bluestone has grown to become a significant nonbank lender, employing more than 200 staff and managing in excess of A$8.4 billion in loans. In March 2018, entities associated with Cerberus Capital Management (Cerberus) completed a transaction with Bluestone to purchase its Asia-Pacific operations. The executive management team of the Asia-Pacific business continues to run operations with additional management positions added to support growth. The investment from Cerberus will see Bluestone broaden its product suite to have an increased focus on near-prime borrowers and, in the longer term, a move into other loan products.

◆ contact details

Campbell Smyth Chief Executive Officer +61 2 8115 5167 campbell.smyth@bluestone.com.au www.bluestone.com.au

CITI AUSTRALIA

COLUMBUS CAPITAL

AUSTRALIAN ADI

YES

AUSTRALIAN ADI

SECURITISATION PROGRAMME NAMES

SAMT, CITI CARDS AUSTRALIA MASTER TRUST

SECURITISATION PROGRAMME NAME

TRITON

U S E O F S ECURITISATION

USE OF SECURITISATION TYPE OF SECURITISATION ISSUED

PRIME RMBS 66%

TYPES OF SECURITISATION ISSUED

PRIME RMBS, CREDIT CARD ABS

PROPORTION OF OUTSTANDING WHOLESALE FUNDING SOURCED VIA SECURITISATION

NUMBER OF SECURITISATIONS ISSUED

TOTAL VOLUME ISSUED

A$13.8BN

TOTAL VOLUME ISSUED

A$3.8BN

CURRENCIES ON ISSUE

AUD

OUTSTANDING VOLUME OF SECURITISED ISSUES

TOTAL DOMESTIC VS OFFSHORE ISSUANCE

80% DOMESTIC 20% OFFSHORE

A$3.8BN

OUTSTANDING VOLUME OF SECURITISED ISSUES

A$1.8BN

s part of one of the world’s largest financial-services companies with a presence in nearly 100 countries, Citi Australia has been providing financial services to Australian consumers, corporations, institutions and governments for more than 30 years. Citi has been servicing and managing asset-backed portfolios since 1995. As of the end of June 2018, Citi had a A$7.8 billion portfolio of Australian mortgage assets and a A$5 billion portfolio of Australian creditcard assets, with around 31% of these assets securitised. There have been 15 issues from the SAMT programme, 18 from the legacy Compass Master Trust programme and one from the Citi Card Australia Master Trust programme. The SAMT structure is an active programme that has been in operation since 2003.

olumbus Capital was established in 2006 as a nonbank wholesale funder. In 2012, it acquired Origin Mortgage Management Services, its third-party wholesale lending business, from ANZ Banking Group. Columbus Capital has Australian credit and financial-services licences issued by the Australian Securities and Investments Commission. The company offers an extensive range of white-label home-loan products via strategic relationships and also via its online channel focused solely on the prime mortgage space. Columbus Capital also offers third-party servicing capabilities covering home loans, consumer-finance, lease and commercial ABS products.

◆ contact details

Charles Finkelstein Country Treasurer +61 2 8225 6096 charles.finkelstein@citi.com William Mortimer Head of Securitised Products Australia & New Zealand +61 2 8225 2503 william.mortimer@citi.com www.citi.com/australia

◆ contact details

Karl Sick Treasurer +61 2 9273 8132 karl.sick@colcap.com.au www.colcap.com.au 55

ISSUER PROFILES

COMMONWEALTH BANK OF AUSTRALIA AUSTRALIAN ADI SECURITISATION PROGRAMME NAME

CREDIT UNION AUSTRALIA

FIRSTMAC

YES

AUSTRALIAN ADI

YES

AUSTRALIAN ADI

MEDALLION

SECURITISATION PROGRAMME NAME

HARVEY

SECURITISATION PROGRAMME NAME

FIRSTMAC MORTGAGE FUNDING TRUST

U S E O F SECURITISATION

USE O F SE CU RI T IS A T IO N

USE OF SECURITISATION

PRIME RMBS

TYPE OF SECURITISATION ISSUED

PRIME RMBS

TYPE OF SECURITISATION ISSUED

PRIME RMBS

PROPORTION OF OUTSTANDING WHOLESALE FUNDING SOURCED VIA SECURITISATION

52%

75%

NUMBER OF SECURITISATIONS ISSUED

PROPORTION OF OUTSTANDING WHOLESALE FUNDING SOURCED VIA SECURITISATION

A$65.4BN

TOTAL VOLUME ISSUED

A$8.8BN

NUMBER OF SECURITISATIONS ISSUED

TOTAL VOLUME ISSUED TOTAL DOMESTIC VS OFFSHORE ISSUANCE

100% DOMESTIC

TOTAL DOMESTIC VS OFFSHORE ISSUANCE

100% DOMESTIC

TOTAL VOLUME ISSUED

A$22.6BN 91% DOMESTIC 9% OFFSHORE

A$15.3BN

OUTSTANDING VOLUME OF SECURITISED ISSUES

TOTAL DOMESTIC VS OFFSHORE ISSUANCE

A$2.6BN

OUTSTANDING VOLUME OF SECURITISED ISSUES

A$8BN

TYPE OF SECURITISATION ISSUED PROPORTION OF OUTSTANDING WHOLESALE FUNDING SOURCED VIA SECURITISATION

OUTSTANDING VOLUME OF SECURITISED ISSUES

ommonwealth Bank of Australia is Australia’s leading provider of integrated financial services including retail, premium, business and institutional banking, funds-management, superannuation, insurance, investment and share-broking products and services. The bank’s approach to wholesale funding is to remain diversified across markets and to maintain a degree of flexibility around transaction timing. Wholesale funding is complemented by securitisation issues through the Medallion programme.

◆ contact details

Ed Freilikh Executive Manager, Group Funding +61 2 9118 1337 edward.freilikh@cba.com.au www.commbank.com.au/ groupfunding 56 · Australian Securitisation Journal | Issue 15_2019

redit Union Australia (CUA) is Australia’s oldest and largest credit union. It was formed through the amalgamation of 171 credit unions and mutuals over the past 72 years and today has around 50 branches across Queensland, New South Wales, the Australian Capital Territory, Victoria and Western Australia. CUA provides retail-banking products and services to more than 470,000 members. It also operates its own wholly owned health-insurance subsidiary, CUA Health. CUA is an authorised deposittaking institution and is regulated by the Australian Prudential Regulation Authority. CUA has a market share of just less than 1% of the home-lending market with approximately A$14 billion in assets. Owner-occupier and investor home lending account for approximately 95% of CUA’s loan book.

◆ contact details

Len Stone Treasurer +61 7 3552 4662 leonard.stone@cua.com.au www.cua.com.au

irstmac is a leading nonbank provider of prime home loans to the Australian market and has funded in excess of 100,000 home loans from the inception of its lending programme in 2002. Firstmac provides consumers with an extensive selection of home-loan products which are available via thirdparty loan introducers and by way of Firstmac’s own online retail platform, www.loans.com.au. Firstmac is a regular issuer of residential mortgage-backed securities and is currently among the top 10 issuers. It has also diversified its business to include motor-vehicle financing and a managed-investment-fund offering.

◆ contact details

James Austin Chief Financial Officer +61 7 3017 8883 james.austin@firstmac.com.au Paul Eagar Director, Securitisation +61 2 8579 8403 paul.eagar@firstmac.com.au www.firstmac.com.au

FLEXIGROUP

IMB BANK

HERITAGE BANK

AUSTRALIAN ADI

SECURITISATION PROGRAMME NAMES

FLEXI ABS, Q CARD TRUST

SECURITISATION PROGRAMME NAME

USE O F SE CU RI T I SAT IO N

YES

AUSTRALIAN ADI

YES

HBS

SECURITISATION PROGRAMME NAME

ILLAWARRA

U S E O F S ECURITISATION

TYPE OF SECURITISATION ISSUED

ABS

PROPORTION OF OUTSTANDING WHOLESALE FUNDING SOURCED VIA SECURITISATION

TYPE OF SECURITISATION ISSUED

35%

NUMBER OF SECURITISATIONS ISSUED

PROPORTION OF OUTSTANDING WHOLESALE FUNDING SOURCED APPROX. 49% VIA SECURITISATION

TOTAL VOLUME ISSUED

A$2.8BN

TOTAL DOMESTIC VS OFFSHORE ISSUANCE

>80% DOMESTIC

OUTSTANDING VOLUME OF SECURITISED ISSUES

A$750M

* All data as at October 2018.

n Australian Securities Exchange 200-listed Australian public company, FlexiGroup is a diversified financial-services group providing “no-interest-ever” loans, leasing, vendor-finance programmes, interest-free finance, credit cards, lay-by and other finance solutions to consumers and businesses. FlexiGroup operates in Australia, New Zealand and Ireland. FlexiGroup operates under a number of brands including Lisa, Certegy, Oxipay, Once, Lombard and SKYE in Australia, and Q Card, Farmers Finance Card, Q Mastercard and Flight Centre Mastercard in New Zealand. FlexiGroup has been an annual issuer from its Certegy brand since 2011 and from the Q Card Trust – a revolving, continuous-issuance vehicle – since 2014. ◆ contact details

Paul Jamieson Group Treasurer +64 9 525 8593 paul.jamieson@flexigroup.co.nz Bianca Spata Head of Group Funding +61 2 8905 2625 bianca.spata@flexigroup.com.au www.flexigroup.com.au

NUMBER OF SECURITISATIONS ISSUED

PRIME RMBS

12 PUBLIC DEALS, 3 AUD WAREHOUSES, 1 AUD INTERNAL SECURITISATION, 1 AUD PRIVATE DEAL

TOTAL VOLUME ISSUED

APPROX. A$6.8BN EQUIV.

TOTAL DOMESTIC VS OFFSHORE ISSUANCE

APPROX. 63% DOMESTIC 37% OFFSHORE*

OUTSTANDING VOLUME OF SECURITISED ISSUES

APPROX. A$900M EQUIV.

* By original issuance. Only domestic issues remain.

eritage Bank (Heritage) is Australia’s largest mutual bank with approximately A$9.5 billion in total consolidated assets at 30 June 2018. It is a public company, limited by shares and guarantee, which operates as a mutual organisation. The mutual business structure is an integral component of Heritage’s operating philosophy. Heritage is an authorised deposittaking institution regulated by the Australian Prudential Regulation Authority.

◆ contact details

Rob Staskiewicz Structured Finance and Capital Manager staskiewicz.r@heritage.com.au Stuart Murray Term Debt and Liquidity Manager murray.s@heritage.com.au Heritage Treasury +61 7 4694 9500 www.heritage.com.au

USE OF SECURITISATION TYPE OF SECURITISATION ISSUED

PRIME RMBS, SMALL-TICKET CMBS

PROPORTION OF OUTSTANDING WHOLESALE FUNDING SOURCED VIA SECURITISATION

48%

NUMBER OF SECURITISATIONS ISSUED

7 RMBS, 3 CMBS

TOTAL VOLUME ISSUED

A$3.6BN

TOTAL DOMESTIC VS OFFSHORE ISSUANCE

100% DOMESTIC

OUTSTANDING VOLUME OF SECURITISED ISSUES

A$406M

stablished in 1880, IMB Bank (IMB) has been helping people achieve their financial goals for 138 years. IMB offers a full range of banking solutions including home and personal lending, savings and transaction accounts, term deposits, business banking, financial planning and a wide range of insurance and travel products. IMB is regulated by the Australian Prudential Regulation Authority and the Australian Securities and Investments Commission. It is a member of the Customer-Owned Banking Association. IMB has more than 195,000 members and total assets in excess of A$5.9 billion.

◆ contact details

Mark Workman Treasurer +61 2 4298 0172 mark.workman@imb.com.au Ian Witheridge Senior Manager, Finance +61 2 4298 0256 ian.witheridge@imb.com.au www.imb.com.au 57

ISSUER PROFILES

ING BANK (AUSTRALIA) LA TROBE FINANCIAL LATITUDE FINANCIAL SERVICES AUSTRALIAN ADI SECURITISATION PROGRAMME NAME

YES IDOL

USE O F SE CU RI T IS A T IO N TYPE OF SECURITISATION ISSUED

AUSTRALIAN ADI

SECURITISATION PROGRAMME NAME

LA TROBE FINANCIAL CAPITAL MARKETS

U S E O F SECURITISATION PRIME RMBS

TYPE OF SECURITISATION ISSUED

RMBS

PROPORTION OF OUTSTANDING WHOLESALE FUNDING SOURCED VIA SECURITISATION

19%

PROPORTION OF OUTSTANDING WHOLESALE FUNDING SOURCED VIA SECURITISATION

24%

NUMBER OF SECURITISATIONS ISSUED

TOTAL VOLUME ISSUED

A$10.2BN

TOTAL VOLUME ISSUED

A$2.2BN

TOTAL DOMESTIC VS OFFSHORE ISSUANCE

99% DOMESTIC 1% OFFSHORE

TOTAL DOMESTIC VS OFFSHORE ISSUANCE

56% DOMESTIC 44% OFFSHORE

OUTSTANDING VOLUME OF SECURITISED ISSUES

A$1.4BN

OUTSTANDING VOLUME OF SECURITISED ISSUES

A$2.8BN

NG – the trading name of ING Bank (Australia) – is part of the world’s leading direct bank and is wholly owned by ING Group. It offers products in retail mortgages, transactional banking, retail savings, credit cards, personal loans, specialised commercial property and retail superannuation. With more than A$42 billion in retail and business deposits, A$46 billion in retail mortgages and two million customers, ING is the fifth-largest home lender in Australia.

a Trobe Financial is a leading nonbank financial institution offering specialist mortgage-lending products and wealth-management solutions. The company specialises in originating, underwriting and managing granular residential- and commercialmortgage assets. Since 1952, La Trobe Financial’s business has grown to a A$6 billion balance sheet with more than 300 staff and offices in Melbourne, Sydney, Shanghai and Hong Kong. La Trobe Financial has helped more than 140,000 individuals obtain mortgage finance and has entered into a strategic partnership with the Blackstone Group.

◆ contact details

Peter Casey Deputy Treasurer +61 2 9018 5132 peter.casey@ing.com.au Samuel Rodgers Treasury Dealer +61 2 9028 4241 samuel.rodgers@ing.com.au www.ing.com.au 58 · Australian Securitisation Journal | Issue 15_2019

Martin Barry Chief Corporate Treasurer +61 2 8046 1502 mbarry@latrobefinancial.com.au Chris Andrews Chief Investment Officer +61 3 8610 2811 candrews@latrobefinancial.com.au Richard Parry Group Senior Portfolio Manager +61 3 8610 2847 rparry@latrobefinancial.com.au www.latrobefinancial.com

AUSTRALIAN ADI

SECURITISATION PROGRAMME NAMES

LATITUDE AUSTRALIA CREDIT CARD MASTER TRUST, LATITUDE AUSTRALIA PERSONAL LOANS TRUST

USE OF SECURITISATION TYPE OF SECURITISATION ISSUED

ABS

NUMBER OF SECURITISATIONS ISSUED

TOTAL VOLUME ISSUED

A$2.7BN

TOTAL DOMESTIC VS OFFSHORE ISSUANCE

100% DOMESTIC

OUTSTANDING VOLUME OF SECURITISED ISSUES

A$2.7BN

atitude Financial Services is a leading consumer-finance business in Australia and New Zealand, with 2.6 million open customer accounts and A$7 billion of receivables at 31 December 2017. The company offers products including personal loans, credit cards, insurance, and interest-free promotional and retail offers. Across Australia and New Zealand, the business employs more than 1,600 staff and services its customers through retailers, brokers, phone and the internet. The company offers a full suite of financing solutions for retail partners, managing credit applications, credit authorisation, billing, remittance and customer-service processing. Its products include Gem Visa, GO MasterCard and 28 Degrees Platinum MasterCard. ◆ contact details

Paul Varro Treasurer +61 414 191 604 paul.varro@latitudefinancial.com Steven Mixter Head of Funding +61 406 554 035 steven.mixter@latitudefinancial.com www.latitudefinancial.com.au

LIBERTY FINANCIAL AUSTRALIAN ADI SECURITISATION PROGRAMME NAME

AUSTRALIAN ADI

YES

LIBERTY

SECURITISATION PROGRAMME NAMES

SMART, PUMA

US E O F SE CU RI T I SAT IO N TYPES OF SECURITISATION ISSUED

ABS, CMBS, RMBS

PROPORTION OF OUTSTANDING WHOLESALE FUNDING SOURCED VIA SECURITISATION

77%

NUMBER OF SECURITISATIONS ISSUED

TOTAL VOLUME ISSUED

A$24BN+

TOTAL DOMESTIC VS OFFSHORE ISSUANCE

89% DOMESTIC 11% OFFSHORE

OUTSTANDING VOLUME OF SECURITISED ISSUES

>A$7.8BN

iberty Financial (Liberty) is a leading diversified-finance company in Australia and New Zealand. Its businesses include residential and commercial mortgages, motor-vehicle finance, personal loans and investments. Liberty has raised more than A$24 billion in domestic and international capital markets across 54 transactions. Since 1997, Liberty has helped more than 350,000 customers “get financial”. Liberty is also Australia’s only investment-grade rated nonbank issuer (BBB-, outlook stable by S&P Global Ratings) and one of only a few lenders with an unblemished capital-markets record with no rating downgrades or charge-offs ever experienced by its securitisation programme.

◆ contact details

Peter Riedel Chief Financial Officer +61 3 8635 8888 priedel@liberty.com.au www.liberty.com.au

MACQUARIE GROUP

acquarie Securitisation (manager of the PUMA RMBS programme) and Macquarie Securities Management (manager of the SMART ABS programme) are wholly owned subsidiaries of Macquarie Bank, which is a regulated authorised deposit-taking institution and part of the Macquarie Group. Macquarie Group is a global diversified financial group providing clients with asset-management and finance, banking, advisory, and risk and capital solutions across debt, equity and commodities. Founded in 1969, Macquarie Group now employs more than 14,400 people in 25 countries around the globe. At 30 June 2018, the group had total assets under management of A$535.7 billion. Macquarie Group is listed in Australia and is regulated by the Australian Prudential Regulation Authority as the owner of Macquarie Bank.

SMART PROGRAMME USE OF SECURITISATION TYPE OF SECURITISATION ISSUED

ABS

NUMBER OF SECURITISATIONS ISSUED

TOTAL VOLUME ISSUED

A$27BN EQUIV.

CURRENCIES ON ISSUE

USD, AUD, EUR

OUTSTANDING VOLUME OF SECURITISED ISSUES

A$3.8BN EQUIV.

PUMA PROGRAMME USE OF SECURITISATION TYPE OF SECURITISATION ISSUED

PRIME RMBS

NUMBER OF SECURITISATIONS ISSUED

TOTAL VOLUME ISSUED

A$55BN EQUIV.

CURRENCIES ON ISSUE

AUD

OUTSTANDING VOLUME OF SECURITISED ISSUES

A$4.5BN EQUIV.

◆ contact details

David Ziegler Division Director, Group Treasury +61 2 8237 8069 david.ziegler@macquarie.com www.macquarie.com 59

ISSUER PROFILES

MOTOR TRADE FINANCE

ME AUSTRALIAN ADI SECURITISATION PROGRAMME NAME

YES

AUSTRALIAN ADI

SMHL

SECURITISATION PROGRAMME NAME

MYSTATE BANK NO

AUSTRALIAN ADI

YES

MTF

SECURITISATION PROGRAMME NAME

CONQUEST

U S E O F SECURITISATION

US E O F SE CU RI T IS A T IO N

USE OF SECURITISATION

TYPE OF SECURITISATION ISSUED NUMBER OF SECURITISATIONS ISSUED* TOTAL VOLUME ISSUED

RMBS

TYPE OF SECURITISATION ISSUED

NUMBER OF SECURITISATIONS ISSUED

A$46BN

TOTAL VOLUME ISSUED

NZ$740M

TOTAL DOMESTIC VS OFFSHORE ISSUANCE

A$30BN, US$10.4BN, €2.2BN

TOTAL DOMESTIC VS OFFSHORE ISSUANCE

78% DOMESTIC 22% OFFSHORE

OUTSTANDING VOLUME OF SECURITISED ISSUES

A$4.3BN

OUTSTANDING VOLUME OF SECURITISED ISSUES

NZ$440M

* Combined Members Equity Bank and historical mortgage-origination business.

E was created 21 years ago to provide low-cost home loans and banking products to members of industry superannuation funds and unions. ME’s new brand represents a modern, strong, innovative and secure bank in the digital era. ME is 100% owned by 26 industry super funds, which created the bank to help all Australians get ahead. Recently, ME opened its product offering to the broader Australian population. It is committed to providing straightforward products. ME has a philosophy of supporting, educating and empowering its customers to achieve their financial objectives.

otor Trade Finance (MTF) was formed in 1970 to enable selected New Zealand dealers to finance sales of motor vehicles to the public. MTF is one of New Zealand’s largest motor-vehicle financiers, operating in all major centres from Kaitaia to Invercargill. MTF originators come from a network of more than 200 dealers selling motor vehicles and motorcycles in conjunction with financial services, and 43 MTF franchises that only sell financial services. Each originator participates in the profit of the business in proportion to the volume of origination written. This provides a compelling financial interest in the quality of business originated and the ongoing success of MTF.

◆ contact details

John Caelli Treasurer +61 3 9708 3825 john.caelli@mebank.com.au Nathan Carr Manager, Funding +61 3 9708 3572 nathan.carr@mebank.com.au Sid Mamgain Manager, Structured Finance +61 3 9708 3747 sid.mamgain@mebank.com.au www.mebank.com.au 60 · Australian Securitisation Journal | Issue 15_2019

ABS

◆ contact details

Jason Hughes Securitisation Manager +64 3 474 6381 jhughes@mtf.co.nz Kyle Cameron Chief Financial Officer +64 3 474 6381 kcameron@mtf.co.nz www.mtf.co.nz

TYPE OF SECURITISATION ISSUED

PRIME RMBS

PROPORTION OF OUTSTANDING WHOLESALE FUNDING SOURCED VIA SECURITISATION

77%

NUMBER OF SECURITISATIONS ISSUED

7 EXTERNAL RMBS

TOTAL VOLUME ISSUED

A$2.3BN

TOTAL DOMESTIC VS OFFSHORE ISSUANCE

100% DOMESTIC

OUTSTANDING VOLUME OF SECURITISED ISSUES

A$900M

yState Bank is a wholly owned subsidiary of MyState Limited – a national diversified financialservices group headquartered in Tasmania. With a customer-centric culture, MyState Bank offers banking, lending, financial and insurance services across Australia. MyState Bank’s loan portfolio is in excess of A$4.5 billion and is sourced directly via its branch network in Tasmania and central Queensland, and Australia-wide via its digital presence and broker network. MyState Bank also sources deposits via branch and digital channels. MyState Bank is an authorised deposit-taking institution and is regulated by the Australian Prudential Regulatory Authority.

◆ contact details

Ryan Sharp Treasurer +61 3 6215 9554 ryan.sharp@mystate.com.au Susan Castley Structured Finance Analyst +61 3 6215 9552 susan.castley@mystate.com.au www.mystate.com.au

NATIONAL AUSTRALIA BANK

PEPPER GROUP

PEOPLE’S CHOICE CREDIT UNION

AUSTRALIAN ADI

YES

AUSTRALIAN ADI

YES

AUSTRALIAN ADI

SECURITISATION PROGRAMME NAME

NATIONAL RMBS

SECURITISATION PROGRAMME NAME

LIGHT

SECURITISATION PROGRAMME NAMES

PEPPER RESIDENTIAL SECURITIES (PRS), PEPPER PRIME, PEPPER I-PRIME

US E O F SE CU RI T I SAT IO N

U S E O F S ECURITISATION

TYPE OF SECURITISATION ISSUED

PRIME RMBS

TYPE OF SECURITISATION ISSUED

PRIME RMBS

NUMBER OF SECURITISATIONS ISSUED

6 EXTERNAL RMBS

69%

TOTAL VOLUME ISSUED

APPROX A$18BN (EXCLUDES RETAINED DEALS)

PROPORTION OF OUTSTANDING WHOLESALE FUNDING SOURCED VIA SECURITISATION NUMBER OF SECURITISATIONS ISSUED

TOTAL VOLUME ISSUED

A$3.1BN

TOTAL VOLUME OF DOMESTIC ISSUES OUTSTANDING

A$3.7BN

TOTAL DOMESTIC VS OFFSHORE ISSUANCE

100% DOMESTIC

TOTAL CROSS-BORDER TRANCHES ISSUED

OUTSTANDING VOLUME OF SECURITISED ISSUES

A$1.2BN

ational Australia Bank (NAB) is a major financial-services organisation in Australia and New Zealand with more than 30,000 people serving nine million customers at more than 900 locations in Australia, New Zealand and around the world. As Australia’s largest business bank, NAB works with small, medium and large businesses. The bank is there from the beginning to support customers through every stage of the business lifecycle. NAB funds some of the most important infrastructure in its communities – including schools, hospitals and roads – and does so in a way that is responsible, inclusive and innovative.

ustralian Central Credit Union, trading as People’s Choice Credit Union (People’s Choice), is one of Australia’s largest credit unions, with more than A$10 billion of total assets under management and advice. People’s Choice has more than 360,000 members serviced through branches in South Australia, the Northern Territory, Victoria, Western Australia and the Australian Capital Territory. People’s Choice is an authorised deposit-taking institution, is subject to prudential supervision under Australia’s Banking Act, and is regulated by the Australian Prudential Regulation Authority.

USE OF SECURITISATION TYPE OF SECURITISATION ISSUED

RMBS

NUMBER OF SECURITISATIONS ISSUED

19 PRS (9 OUTSTANDING, 10 CALLED) 4 PEPPER PRIME (ALL OUTSTANDING) 1 PEPPER I-PRIME (OUTSTANDING)

TOTAL VOLUME ISSUED

A$9.7BN

TOTAL DOMESTIC VS OFFSHORE ISSUANCE

78% DOMESTIC 22% OFFSHORE*

OUTSTANDING VOLUME OF SECURITISED ISSUES

NOT DISCLOSED

* Two issues in the Pepper Prime series and six issues in the PRS series have included USD tranches, with the balance of the notes in AUD.

stablished in 2001, Pepper Group (Pepper) is a leading Australianheadquartered financial-services group with businesses in Australia, Asia and Europe encompassing lending, asset-servicing and corporate realestate advisory. In Australia, Pepper has expanded from being a nonconforming mortgage lender to also offer prime residential mortgages, auto and equipment leasing and personal loans. Pepper is a third-party servicer and asset manager across a range of asset classes. It had almost A$60 billion in assets under management as at 30 June 2018. ◆ contact details

◆ contact details

Eva Zileli Head of Group Funding +61 3 8634 8219 eva.zileli@nab.com.au Sarah Samson Head of Securitisation Origination +61 3 8641 2997 sarah.samson@nab.com.au www.nab.com.au

◆ contact details

Paul Farmer Manager Treasury +61 8 8305 1898 pfarmer@peopleschoicecu.com.au Heather Gale Treasurer +61 8 8305 1829 hgale@peopleschoicecu.com.au www.peopleschoicecu.com.au

Paul Byrne Group Treasurer +61 2 8624 3438 pbyrne@pepper.com.au Matthew O’Hare Australian Treasurer +61 2 9463 4624 mohare@pepper.com.au Andrew Twyford Group Head of Debt Capital Markets +61 2 8624 9091 atwyford@pepper.com.au www.pepper.com.au 61

ISSUER PROFILES

P&N BANK AUSTRALIAN ADI SECURITISATION PROGRAMME NAME

REDZED LENDING SOLUTIONS YES

AUSTRALIAN ADI

PINNACLE

SECURITISATION PROGRAMME NAME

REDZED

SECURITISATION PROGRAMME NAMES

RESIMAC PREMIER, RESIMAC BASTILLE, RESIMAC AVOCA, RESIMAC VERSAILLES

USE O F SE CU RI T IS A T IO N TYPE OF SECURITISATION ISSUED

U S E O F SECURITISATION PRIME RMBS

TYPE OF SECURITISATION ISSUED

RMBS

PROPORTION OF OUTSTANDING WHOLESALE FUNDING SOURCED VIA SECURITISATION

11%

PROPORTION OF OUTSTANDING WHOLESALE FUNDING SOURCED VIA SECURITISATION

65%

NUMBER OF SECURITISATIONS ISSUED

TOTAL VOLUME ISSUED

A$925M

TOTAL VOLUME ISSUED

A$1.5BN

TOTAL DOMESTIC VS OFFSHORE ISSUANCE

100% DOMESTIC

TOTAL DOMESTIC VS OFFSHORE ISSUANCE

85% DOMESTIC 15% OFFSHORE

A$350M

OUTSTANDING VOLUME OF SECURITISED ISSUES

RESIMAC

&N Bank (P&N) is Western Australia’s largest locally owned and managed bank. Operating under a customer-owned model, P&N’s primary focus is its 90,000-plus members. P&N aims to provide a genuine banking alternative for people who value competitive and convenient banking products, outstanding customer service and community spirit. With assets in excess of A$4 billion, P&N was Australia’s eighth-largest mutual bank at the end of August 2018. P&N is an authorised deposit-taking institution regulated to the same high standards as the major banks by the Australian Prudential Regulation Authority, the Australian Securities and Investments Commission, the Australian Transaction Reports and Analysis Centre, and the Australian Competition and Consumer Commission.

◆ contact details

Phil Webster Treasurer +61 8 9219 7561 phil.webster@pnbank.com.au www.pnbank.com.au 62 · Australian Securitisation Journal | Issue 15_2019

A$770M

edZed Lending Solutions (RedZed) is one of Australia’s leading lenders dedicated to providing financial solutions to Australia’s under-serviced self-employed segment. The company specialises in originating, underwriting and managing residential, commercial and asset-finance loans with a focus on understanding the needs of the self-employed. Established in 2006, RedZed has helped thousands of Australian customers, originated in excess of A$2.5 billion in loans and generates assets in excess of A$500 million per year.

USE OF SECURITISATION TYPES OF SECURITISATION ISSUED

RMBS, NIM BOND

PROPORTION OF OUTSTANDING WHOLESALE FUNDING SOURCED VIA SECURITISATION

100%

NUMBER OF SECURITISATIONS ISSUED

TOTAL VOLUME ISSUED

A$26.6BN

TOTAL DOMESTIC VS OFFSHORE ISSUANCE

58% DOMESTIC 42% OFFSHORE

OUTSTANDING VOLUME OF SECURITISED ISSUES

A$6.5BN

esimac is a leading nonbank financial institution that commenced operations in 1985. The company offers a suite of prime and specialist lending products tailored to the residential markets in Australia and New Zealand. Resimac’s capital-markets activities are core to its enterprise strategy and it is one of the most prolific Australian nonbank issuers. It was the first Australian RMBS issuer in 1988 and since this time has issued more than A$26 billion equivalent in 44 deals including in Europe, the US and New Zealand. Resimac’s asset-servicing credentials are recognised by a “strong” servicer ranking from S&P Global Ratings. ◆ contact details

◆ contact details

Chris Wilson Chief Financial Officer +61 3 9605 3500 cwilson@redzed.com www.redzed.com

Mary Ploughman Chief Executive Officer +61 2 9248 0308 mary.ploughman@resimac.com.au Andrew Marsden General Manager, Treasury and Securitisation +61 2 9248 6507 andrew.marsden@resimac.com.au www.resimac.com.au

SUNCORP AUSTRALIAN ADI SECURITISATION PROGRAMME NAME

THINKTANK YES

AUSTRALIAN ADI

APOLLO

SECURITISATION PROGRAMME NAMES

THINK TANK

USE O F SE CU RI T I SA T IO N TYPE OF SECURITISATION ISSUED

U S E O F S ECURITISATION PRIME RMBS

TYPE OF SECURITISATION ISSUED

CMBS

PROPORTION OF OUTSTANDING WHOLESALE FUNDING SOURCED VIA SECURITISATION

20%

PROPORTION OF OUTSTANDING WHOLESALE FUNDING SOURCED VIA SECURITISATION

78%

NUMBER OF SECURITISATIONS ISSUED

TOTAL VOLUME ISSUED

A$26.5BN

TOTAL VOLUME ISSUED

A$1.BN

A$4.7BN

TOTAL DOMESTIC VS OFFSHORE ISSUANCE

100% DOMESTIC

OUTSTANDING VOLUME OF SECURITISED ISSUES

A$739M

OUTSTANDING VOLUME OF SECURITISED ISSUES

uncorp Group is a top-20 Australian Securities Exchangelisted company with A$99 billion in assets. The company has evolved into a unique franchise, delivering highly valued banking, wealth and insurance products and services across Australia and New Zealand. The group has approximately 13,300 employees in Australia and New Zealand and serves approximately nine million customers through its trusted brands. Suncorp Bank is one of Australia’s largest regional banks with approximately one million individual, commercial (SME) and agribusiness banking customers, primarily in Queensland.

◆ contact details

Simon Lewis Deputy Treasurer +61 7 3362 4037 simon.lewis@suncorp.com.au Maddalena Gowing Manager, Securitisation and Covered Bonds +61 7 3362 4038 maddalena.gowing@suncorp.com.au Denise Bal Securitisation and Covered Bonds Specialist +61 7 3362 4069 denise.bal@suncorp.com.au www.suncorpbank.com.au

hinktank Commercial Property Finance (Thinktank) is an independent nonbank financial institution specialising in the provision of commercial-property mortgage finance up to A$3 million in the Australian SME sector. Commencing operations in 2006, Thinktank is a programmatic issuer supported by a national distribution network and offices in Sydney, Melbourne and Brisbane. Thinktank’s asset quality and performance is notable for conservative LVRs, low arrears and a negligible loss history. Under the continued guidance of the founders, growth in the loan portfolio has been measured and is strongly supported by long-term domestic and offshore institutional stakeholders. ◆ contact details

Cullen Hughes Chief Financial Officer and Treasurer +61 2 8669 5518 chughes@thinktank.net.au Jonathan Street Chief Executive Officer +61 2 8669 5505 jstreet@thinktank.net.au www.thinktank.net.au

ASF EDUCATION COURSE DATES SYDNEY 2019 Securitisation Fundamentals 28 FEBRUARY

Securitisation Professionals 27-28 MARCH

Securitisation Applied 30 APRIL – 1 MAY

Securitisation Trust Management 30 MAY

Securitisation Professionals 26-27 JUNE Detailed course information and registration are available on the ASF’s website:

www.securitisation.com.au

ISSUER PROFILES

WESTPAC BANKING CORPORATION AUSTRALIAN ADI

YES

estpac Banking Corporation (Westpac) is Australia’s second-largest banking organisation and one of the largest in New Zealand. Westpac provides a broad range of banking and financial services in these markets including retail, business and institutional banking, and wealthmanagement services. At 31 March 2018, Westpac had total assets of A$872 billion. Westpac’s ordinary shares and certain other securities are quoted on the Australian Securities Exchange and, at 31 March 2018, the bank’s market capitalisation was A$97 billion.

RMBS PROGRAMME U S E O F SECURITISATION SECURITISATION PROGRAMME NAMES

WESTPAC SECURITISATION (WST), CRUSADE RMBS

TYPE OF SECURITISATION ISSUED

PRIME RMBS

PROPORTION OF OUTSTANDING WHOLESALE FUNDING SOURCED VIA SECURITISATION1

3.4%

NUMBER OF SECURITISATIONS ISSUED

TOTAL VOLUME ISSUED2

APPROX. A$78.6BN

TOTAL DOMESTIC VS OFFSHORE ISSUANCE3

100% DOMESTIC

OUTSTANDUNG VOLUME OF SECURITISED ISSUES

APPROX. A$5.2BN

1 Includes RMBS and ABS. As at 31 March 2018. Residual maturity basis. 2 Approx. 50% Crusade RMBS, 50% WST RMBS. 3 Based on issues currently outstanding.

ABS PROGRAMME U S E O F SECURITISATION

∗

SECURITISATION PROGRAMME NAME

CRUSADE ABS

TYPE OF SECURITISATION ISSUED

ABS

PROPORTION OF OUTSTANDING WHOLESALE FUNDING SOURCED VIA SECURITISATION1

3.4%

NUMBER OF SECURITISATIONS ISSUED

TOTAL VOLUME ISSUED2

APPROX. A$10.3BN

TOTAL DOMESTIC VS OFFSHORE ISSUANCE3

100% DOMESTIC

OUTSTANDING VOLUME OF SECURITISED ISSUES

APPROX A$4.4BN

1 Includes RMBS and ABS. As at 31 March 2018. Residual maturity basis. 2 100% Crusade ABS. 3 Based on issues currently outstanding.

ASF EDUCATION COURSE DATES MELBOURNE AND AUCKLAND 2019 Securitisation Fundamentals 19 MARCH (AUCKLAND) 22 MAY (MELBOURNE)

Securitisation Professionals 10-11 APRIL (MELBOURNE)

Detailed course information and registration are available on the ASF’s website:

www.securitisation.com.au ◆ contact details

Guy Volpicella Head of Structured Funding and Capital +61 2 8254 9261 gvolpicella@westpac.com.au www.westpac.com.au 64 · Australian Securitisation Journal | Issue 15_2019

IS THIS YOUR COPY OF ASJ ? To register your interest in receiving a copy of the ASJ or to discuss sponsorship opportunities, please contact: Jeremy Masters â&#x2014;&#x2020; jmasters@kanganews.com â&#x2014;&#x2020; +61 2 8256 5577