Pepper to Acquire $5.0 Billion Residential Mortgage Portfolio from GE Capital

Wednesday, 25 May 2011

Australian specialist mortgage lender, Pepper Australia Pty Limited ("Pepper") has today signed definitive agreements to acquire the approximately $5.0 billion residential mortgage portfolio originated by GE Capital Australia and New Zealand.

The acquisition is one of the largest whole loan transactions in Australian history. Pepper Executive Chairman, Mike Culhane, said, "The acquisition of this loan portfolio is transformational for Pepper and enables us to grow assets under management quickly at a time when non bank lenders are seeking to grow their market share, rebuild a competitive marketplace, and broaden the choice of home lending options for Australian consumers".

The acquisition of the GE Capital home loan portfolio will accelerate Pepper's expansion into niche segments of the prime residential lending market in Australia and New Zealand. Pepper Managing Director & CEO , Patrick Tuttle, commented, "The acquisition accelerates Pepper's long-term growth plans within the Australian and New Zealand residential lending space. It presents us with a unique opportunity to further expand our existing business model into prime residential lending, extending our specialist product suite. This enhanced offering will be leveraged through our growing national broker distribution networks, utilising our core credit underwriting and loan servicing expertise." The purchase of the GE Capital home loan portfolio will enable Pepper to drive significant economies of scale and technology enhancements across our mortgage origination and third-party loan servicing platform," he added.

Backed by a consortium of institutional banks and mezzanine investors, Pepper will initially acquire the GE Capital home loan portfolio through a series of warehouse financing facilities. Mike Culhane commented, "The support of our senior facility providers, Commonwealth Bank of Australia, National Australia Bank and Westpac Banking Corporation, as well as mezzanine investors comprising Deutsche Bank AG, Varde Partners Asia, York Capital Management, IFM's Alternative Fixed Income Fund, and MKM Capital has been instrumental in enabling Pepper to finance this milestone transaction."

He added, "Pepper plans to issue a series of residential mortgage-backed securities (RMBS) deals over the next few years, subject to prevailing market conditions. Since 2003, we have successfully issued around $2.5 billion of RMBS transactions through our Pepper Residential Securities ("PRS") programme."

Since launching in Australia in early 2001, Pepper has built a strong reputation for its expertise in originating and servicing high quality residential mortgage assets. During the past 10 years Pepper has consistently demonstrated superior performance both in the quality of its own lending and the improvement in performance of portfolios it has managed on behalf of third parties.

"Pepper's robust performance during the GFC has given our funding partners the confidence to back our ability to take on an acquisition of this size. Our focus on technology and a tailored customer experience will ensure that all our customers receive the highest level of service," Tuttle said.