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YBR opens negotiations with major for $300m mortgage facility

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Reporter 5 minute read

The financial services franchise group has announced that it has commenced negotiations with a major bank to secure a $300 million mortgage warehouse facility.

Yellow Brick Road (YBR) has announced that it has entered into exclusive negotiations with an unnamed major bank to secure a $300 million residential mortgage-backed securities (RMBS) warehouse facility.

In a statement, YBR said that securing the facility and commencing a securitisation program would be subject to “YBR being able to enter into definitive legally binding transaction documentation with the warehouse lender and all other relevant third parties and satisfying any related conditions that will be included in the transaction documentation”.

This is the second time in the past month that YBR has sought to secure RMBS funding from a major bank after negotiations with another unnamed major “terminated”.

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Following the commencement of the initial negotiations, YBR’s executive chairman, Mark Bouris, said that the group had always sought to secure such funding for its lending business, Vow Financial, adding that the timing of the negotiations was pertinent when considering “gaps” in the market.

“We have been building towards entering the securitisation market for a number of years. In fact, it was always our intention to do so once we achieved a substantial distribution business, which we have via our YBR-branded ‘shopfront’ franchisee business and Vow independent broker business,” Mr Bouris said.

“The power of this distribution, coupled with our own credit and funding capacity, will be formidable, and the timing could not be better given the present and foreseeable gaps in the market in certain categories of mortgage products and the renewed interest in the supply of money coming from the debt capital markets to fill these gaps.”

The second round of negotiations has commenced amid a takeover bid from investment company Mercantile OFM (a wholly owned subsidiary of Mercantile Investment Company).

Mercantile has offered YBR an off-market takeover bid to acquire all of the ordinary shares in the group for 0.09 cents. The offer is not subject to approval by YBR shareholders in a general meeting.

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It would allow YBR shareholders to sell all of their YBR shares at a cash price that represents a 3.2 per cent discount to $0.094.

However, Mr Boris has encouraged YBR shareholders to reject what he called a “grossly inadequate” offer.

The offer is conditional on Mercantile OFM acquiring a relevant interest in more than 50.1 per cent of YBR shares on issue and no prescribed occurrences.

[Related: YBR rues ‘grossly inadequate’ takeover bid]

YBR opens negotiations with major for $300m mortgage facility
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