Pepper Money raises 1st $1bn RMBS for 2023

Non-bank lender Pepper Money Limited (Pepper Money) has priced its first public securitisation in 2023, upsizing to $1 billion, it announced on Friday (17 February).

With PRS 35 due to settle on 24 February, such residential mortgage-backed securities (RMBS) are designed to optimise the funding of Pepper’s Australian mortgage originations, the lender explained.

Pepper Money’s PRS (Pepper Residential Securities) program comprises a mix of non-conforming and prime mortgages, the company confirmed.

The pricing details of the note classes are as follows: A1-s, 1.20 per cent; A1-a, 1.70 per cent; A2, 2.55 per cent; B, 3.25 per cent; C, 3.60 per cent; D, 4.30 per cent; E, 6.25 per cent; F, 7.25 per cent; while class G was ‘ND’.

“Pepper Money is off to a very strong start for CY2023, with our first public securitisation raising A$1.0bn to support our non-conforming mortgage growth,” commented Pepper Money chief executive Mario Rehayem.

“This follows Pepper Money raising over $5.0 billion in CY2022.

“The success of PRS35 reflects the strong, ongoing investor support for Pepper Money.

“As one of Australia’s leading non-bank lenders, we continue to demonstrate the ability of the business to grow, supported by the scale and depth of our funding capabilities.”

Ongoing investor support displayed

According to Pepper, and including PSR35, since 2003, Pepper Money has successfully completed 55 securitisation transactions.

This has raised more than $34.2 billion across multiple economic cycles “demonstrating ongoing investor support and confidence” in Pepper Money’s 22+ years proven track record of “pricing for risk” and the “depth of its credit and underwriting capabilities,” it has explained.

Pepper Money treasurer Anthony Moir said: “Our ability to upsize this transaction from $500 million to $1 billion is very encouraging and highlights a significant improvement in credit market conditions and the strength of Pepper Money’s funding programme.”

Strong support from big banks

Pepper Money used the opportunity of its first RMBS raising for 2023 to thank those bigger banks that assisted with the action.

These included: Westpac Banking Corporation (arranger and joint-lead manager); Citigroup Global Markets Australia Pty Limited; Commonwealth Bank of Australia; Macquarie Bank Limited; National Australia Bank Limited and the Standard Chartered Bank “for their work as joint-lead managers,” Pepper explained.

The 2023 results followed the non-bank lender in October last year pricing its seventh residential mortgage-backed security transaction, which took funds raised that year to over $5 billion.

That pricing was a $750 million RMBS, at the time, this was its third non-conforming PRS deal for 2022.

[Related: Pepper Money removes commercial finance clawbacks]