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ABSF announces its first $250m investment

by Reporter6 minute read

The federal government’s funds manager has revealed the recipient of its first $250-million tranche of investment to support small-business lending.

After welcoming investment proposals for the Australian Business Securitisation Fund (ABSF) in December, the Australian Office of Financial Management (AOFM) – which manages the fund – has now announced that it intends to invest the first tranche of $250 million in securities issued by a warehouse vehicle sponsored by Judo Bank.

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In addition to the investment, which is subject to satisfactory completion of the documentation process, the AOFM intends to invest a further $250 million in a different security class, issued by the same warehouse facility on a temporary basis.

The funds will be allocated from the Structured Finance Support Fund (SFSF).

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Challenger Investment Partners and Herbert Smith Freehills acted as advisers to the AOFM on the Judo Bank warehouse transaction, with Société Générale’s Sydney Branch acting as structurer and arranger of the transaction.

Judo Bank’s co-founder and co-CEO, David Hornery, confirmed that the AOFM (via ABSF) would be investing an initial $250 million into the Judo lending warehouse, which would be used to provide credit to SMEs nationally.

He added that a further $250 million was expected to be invested through the Federal Government’s recently announced $15 billion Structured Finance Support Fund, taking the total amount of funding available to Judo through these funds, to $500 million.

“At a time when the availability of credit has never been more important to tens of thousands of Australian SMEs, Judo is delighted to be able to announce such a substantial investment by the AOFM,” he said.

“The relationship banking model sits at the heart of the Judo story, and it is at times like these, that the provision of that one on one support and advice, alongside the extension of funding really comes to the fore.

“The investments by the ABSF and the SFSF, which have been set up by the Federal Government to provide funding to SME lenders, and in turn to the SME community, are particularly timely. “They will have a direct and positive impact on small and medium-sized enterprises nationally,” he said.

The AOFM noted that proposals from shortlisted bidders from the first round of ABSF investments would be automatically considered for investment by the SFSF.

AOFM to reconsider timing of second round

The AOFM has also revealed that while it had intended to announce a call for a second round of ABSF proposals prior to 1 July 2020, it would now “make an assessment of market conditions” in early July 2020 before proceeding.

In the meantime, potential bidders have been advised that the SFSF has “sufficient flexibility” within its mandate to “accommodate proposals that would be within the scope of the ABSF”.

The AOFM’s latest announcement comes less than a month after the federal government said it would invest $15 billion into a new fund to enable smaller lenders to continue lending to consumers and businesses.

Federal Treasurer Josh Frydenberg announced that the AOFM would be provided with an investment capacity of $15 billion to invest in structured finance markets used by smaller lenders that provide consumer and business finance.

The first investment made by the AOFM was a purchase of $189.14 million across six tranches of the Firstmac Series 1-2020 Transaction. 

[Related: Further details of $15bn lending fund released]

ABSF announces its first $250m investment
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