PSIS Ltd has sold $100 million of bonds backed by residential mortgages, which it says is the first transaction of its type in this market without lender mortgage insurance (LMI).PSIS sold $88.5 million of AAA rated Class A bonds. The bonds have such a hi
PSIS Ltd has sold $100 million of bonds backed by residential mortgages, which it says is the first transaction of its type in this market without lender mortgage insurance (LMI).
PSIS sold $88.5 million of AAA rated Class A bonds. The bonds have such a high rating because they are subordinated to $11.5 million of Class B bonds, which are held by PSIS. This means losses on mortgage defaults are picked up by the subordinated Class B bond holder to the extent of the size of the Class B issue.
The Class A notes are also eligible to be used in repurchase facilities run by the Reserve Bank of New Zealand.
The Class A bonds were sold at 150 basis point margin over the three month bank bill reference rate.
The 487 mortgages which back the bonds are seen as high quality with a weighted average loan to value ratio of 62 percent. The mortgages are on properties which are 95.7 percent owner-occupied and the weighted average loan size is $193,900.
PSIS chief executive Girol Karacaoglu said this was the first non-LMI prime residential mortgage-backed security transaction in New Zealand to be issued to third party investors.
Dr Karacaoglu said the transaction underscored the overall quality of PSIS loans and broadened the funding profile of the institution.
Westpac Institutional Bank was sole lead manager and arranger of the issue.
