Pepper Calls Pepper Residential Securities Trust No.6 (“PRS6”) Transaction
Thursday, 15 Dec 2011
Pepper Australia Pty Limited (“Pepper”) has today announced that it has exercised its call option (“the call”) on the Pepper Residential Securities Trust No.6 (“PRS6”). The call was fully funded and completed on 15 December 2011. The total loan portfolio held within PRS6 at the call date was approximately $118 million. This is the third call option exercised by Pepper since commencement of the Global Financial Crisis (GFC) in 2007, having previously called its Pepper Residential Securities Trust No.4 (“PRS4”) in April 2008 and Pepper Residential Securities Trust No.5 (“PRS5”) in July 2010. As is the case with PRS6, each of these calls were made on the first eligible Payment Date.
The exercise of the call allowed the PRS6 Trust to fully repay the following notes initially purchased by investors in 27 March 2007:
| Class of Notes |
Current Standard |
Note Balance At Issue Date $'000 |
Note Balance At Call Date $'000 |
| Class A1 | AAA | 420,000 | 66,144 |
| Class A2 | AAA | 84,000 | 13,229 |
| Class A3 | AAA | 49,500 | 7,796 |
| Class B | AA | 19,500 | 11,378 |
| Class C | BBB+ | 18,900 | 11,028 |
| Class E | Non-Rated | 8,100 | 8,100 |
| Class L | Non-Rated | 1,800 | - |
Pepper’s ability to complete the call for the PRS6 Trust 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. 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”, said Pepper’s Managing Director & CEO, Patrick Tuttle. “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”, said Tuttle.
“We genuinely believe that investors will view our calling of the PRS6 Trust in a favourable light, and that it will further enhance Pepper’s reputation as an issuer and servicer of high quality mortgage-backed securities”, added Tuttle.
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