FirstMac has voluntarily offered to buy back the outstanding residential mortgage backed security (RMBS) bonds issued in its Bond Series 2-2004 Trust.
According to a company statement, buying back the outstanding RMBS bonds will give investors the opportunity to capitalise on the higher margins currently available in debt markets.
The 2-2004 bond was issued in August 2004 for a total of $500 million and has an option for FirstMac to exercise a clean-up buy back, or call, when the outstanding principal on the bond reached 20 per cent of the original issue.
This clean up will be made on 22 August 2011 when the bond will have approximately $95 million in principal capital outstanding.
FirstMac notified the custodian on Monday 18 July that it will effectively redeem all notes in the bonds with investors receiving par funds on 22 August 2011.
The 2-2004 bonds’ margins are materially below current market funding costs.
FirstMac managing director Kim Cannon said the non-bank lender was determined to act with integrity in its dealings with investors.
“We are honouring all call commitments in our deals as they were originally sold, despite the fact that new funding will be more expensive for the company,” Mr Cannon said.
“One of FirstMac’s greatest strengths is its ability to attract investors from debt markets and raise funding through issuance of new FirstMac issued RMBS,” he said.
“Investor support and FirstMac’s reputation are more valuable than the short-term pricing benefits alternatively available in this deal.”