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YBR signs $120m RMBS deal

by Charbel Kadib10 minute read
Yellow Brick Road

The financial services group has agreed terms with an Australian bank for a $120-million residential mortgage-backed warehouse facility.

Yellow Brick Road (YBR) has announced that its subsidiary Resi Wholesale Funding (RWF) has signed final definitive legal documentation for a $120-million residential mortgage-backed securities (RMBS) warehouse facility from an undisclosed Australian bank.

The agreement is part of a new joint venture announced last year, which would see affiliate of global alternative asset manager Magnetar Capital assume 50 per cent ownership of RWF to establish a mortgage securitisation business.  

Following the announcement, YBR executive chairman Mark Bouris said the agreement is the first step in a broader push to expand the group’s presence in the mortgage securitisation market.

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“We are very pleased to have finally signed this facility,” Mr Bouris said.

“It has been a long time coming, and we thank all parties for their trust in YBR and patience in this major initiative commencing.

“However, this is only the beginning. We have strong aspirations to prove the operational success of the current facility, then to expand it in size, product breadth and, in due course, new lending segments.”

Mr Bouris added that YBR aims to sell its first mortgage product – aimed at small businesses and self-employed borrowers – in March 2020.

YBR back in the black

YBR’s announcement coincided with the release of the group’s results for the first half of the 2020 financial year (HY20).

YBR posted a profit after tax of $3.97 million, up from a loss of $34.1 million in the previous corresponding period.

YBR’s underlying earnings before interest, tax, depreciation and amortisation rose to $238,000, up from a loss of just over $2 million in the previous corresponding period.

According to YBR, the turnaround in the group’s performance reflected:

  • a 2 per cent increase in revenues from ordinary activities to $86.1 million;
  • net cash from operating activities of $1 million, compared with a net outflow of $366,000 in the prior period;
  • a 17 per cent decline in underlying expenses; and
  • the sale of its 50 per cent share in Smarter Money Investments (SMI) for $7.5 million.

As at the close of HY20, YBR’s cash at bank totalled $9.3 million, up from $4 million as at 30 June 2019.

YBR also expects to receive approximately $5 million during the next 18 months from revenue owing on the sale of the SMI shareholding and the Wealth division.

[Related: YBR reports lift in home lending business]

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