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NZF Group raises $100 mill to help fund lending

Tuesday 15th June 2010

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NZF Group, a financial services company, successfully completed a $100 million sale of residential mortgage-backed securities, which will help it fund future home loan lending.

The securitisation is the first in New Zealand sale since the global financial crisis, signalling investor appetite is returning for assets tied to home loans.

NZF Mortgages Series 2010-1 Trust, arranged and lead managed by Westpac. They pay a floating rate of interest at a margin over the 90-day bank bill rate depending on the class and risk of the notes issued.

As residential mortgage holders make interest and principal payments, the trust receives and pays out interest on money that NZF Group has borrowed. For example, NZF’s $87.8 million A1 class notes, rated AAA by Standard and Poor’s, will pay out 175 basis points above the 90-day bank bill rate, while the $2.5 million of B class notes rated AA- pay a higher margin. If the trust made a loss, the A1 notes would receive its payments ahead of the B notes.

“Investors, once they know and understand the risks, can pick what exposure and risk parameters they deem appropriate,” said Fergus MacDonald, head of bonds and currencies for Tyndall Investment Management, which manages $2.5 billion of bonds and cash.

The issue was not open to the public, with minimum subscriptions of $500,000.

The sale further diversifies NZF’s funding base and frees up $100 million for future loan origination, said managing director John Callaghan.

The notes are backed by mortgages on 403 New Zealand properties, with an average loan size of $286,000. The loans have mortgage insurance with Genworth Financial Mortgage Insurance.

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