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CBA all set for A$1bn RMBS return

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By Rev Hui
03 Sep 2015

Commonwealth Bank of Australia (CBA) is back in the RMBS market with an A$1bn ($718m) transaction that is due to price on Friday.

The Series 2015-2 Medallion Trust is adopting the same three tier structure as its predecessors with an A$920m A1 tranche coming at the top, followed by an A$60m class B note and an A$20m class C junior piece that will be retained by the lender.

While the sizes of the Medallion series can vary from deal to deal, the last three transactions have all sported the same 92/6/2 split with the top of the stack rated AAA (sf) and the class B rated A+ (sf) by Fitch and S&P, respectively.

Similar to Medallion 2015-1, lead manager CBA is only releasing guidance for the A1 portion, which is being marketed at 85bp-90bp over BBSW.

That is slightly wider than the A1 notes of Medallion 2015-1, which priced at 80bp over in March, and a treasury official said the less aggressive pricing is to reflect the higher volatility in the global macro environment rather than any material difference in the asset pool.

Asia_securitization_300pxThe 3,885 loans in the collateral pool have an average seasoning of 31 months and an average borrower exposure of A$257,400. While the latter figure is lower than the A$301,159 in Medallion 2015-1, it is still consistent with other deals of the same series, according to a Fitch pre-sale report.

In the same report, Fitch added that most of the characteristics of the asset pool in the new deal, be it composition of product type, geographic composition as well as concentration, are also in line with previous Medallion deals.

That is no bad thing for investors, though, given that the loans included are those that have been conservatively underwritten.

The weighted average loan/value ratio (LVR) is 58.4%, which is more or less the same as the 59.2% of Medallion 2015-1. Floating rate loans make up 83.9% of the collateral pool, with the rest belonging to fixed rate loans.

Credit enhancement for the A1 notes comes in the 8% provided by the class B and C portions, while the class B will only benefit from the 2% of the class C notes.

The weighted average life of the A1 portion is 2.8 years, compared with 5.2 years for the class B and 9.3 years for class C. All three tranches have a final maturity of October 2047.

Final pricing will be announced on Friday.

Citi and Macquarie are also in the transaction as co-managers.

By Rev Hui
03 Sep 2015