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Non-bank calls residential securities trust

by Staff Reporter10 minute read
The Adviser

Staff Reporter

Pepper has today announced that it has exercised its call option on the Pepper Residential Securities Trust No.6.

The call was fully funded and completed on 15 December 2011.

The total loan portfolio held within Trust No. 6 at the call date was approximately $118 million.


According to a statement by the non-bank lender, Pepper's ability to complete the call for the Trust No. 6 demonstrates its capacity to refinance high quality residential mortgage assets, despite continuing volatility in global securitisation markets.

A large number of Australian issuers of residential mortgage-backed securities (RMBS) have been unable to call their transactions since the commencement of the GFC in 2007.

According to Pepper's managing director Patrick Tuttle, this has led to legitimate concerns from RMBS investors with regard to deal extension risk and their ability to accurately price the underlying securities.

"Fixed income investors need comfort that RMBS issuers have the financial capacity, and indeed intention, to fund call options on all RMBS issues which they sponsor," he said.

"Pepper's capacity and desire to complete the call demonstrates our ongoing commitment to satisfying the intended refinancing obligations for all RMBS transactions in which we retain an underlying beneficial interest. This is the only tangible way in which we can give our programme investors genuine confidence in the expected weighted average lives of securities which we issue into the market."

Mr Tuttle said he hoped the lender's decision to exercise its call option would be viewed in a favourable light, and that it will further enhance Pepper's reputation as an issuer and servicer of high quality mortgage-backed securities.

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