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The non-bank lender has priced its second public securitisation in 2023.
Pepper Money Limited (ASX: PPM) has successfully priced its second residential mortgage-backed security (RMBS) transaction (PRS 36) in 2023, worth $675 million.
The transaction is expected to settle on Thursday (4 May 2023) and is designed to optimise funding for Pepper Money’s Australian mortgage originations, comprising a mix of prime and non-conforming mortgages.
The funds raised will support the growth of Pepper Money’s non-conforming mortgage business and followed the company’s $1 billion securitisation in February 2023.
The announcement followed the non-bank lender’s annual general meeting (27 April) where it announced a 36 per cent drop in the 12 months to March 2023 in its mortgage applications volumes, as demand for mortgages drops amid uncertainty.
Pepper Money told shareholders that it hadn’t been immune from the slowdown in new mortgage lending, with its mortgage applications (including commercial real estate and New Zealand applications) having fallen in the 12 months to March 2023.
“The combination of rising rates, high inflation and consumer uncertainty has impacted the overall market for mortgages,” Pepper Money chief executive Mario Rehayem told shareholders.
Despite the fall in mortgage applications, Mr Rehayem expressed his recent satisfaction with the RMBS transaction and noted that it is a testament to the company’s strong investor support.
“Following our strong start to 2023, with our first public securitisation PRS 35 raising $1.0 billion in February, our ability to raise an additional $675 million under PRS 36 (PP), is a testament to Pepper Money’s strong, ongoing investor support,” Mr Rehayem said.
He added that the company has demonstrated its funding, credit and underwriting capabilities, and risk pricing strategies to grow the business consistently throughout economic and market cycles.
Pepper Money has completed 56 successful securitisation transactions, including PRS 36 since 2003, raising over $34.9 billion.
The company took the opportunity to thank Westpac Banking Corporation for its work as arranger and lead manager and KWM for acting as Pepper Money’s legal counsel.
Non-bank removes commercial clawbacks
Pepper Money has also previously announced the removal of clawbacks for its commercial lending products as of 1 February 2023, following strong signs the commercial property market was positioned for growth.
According to Pepper Money, reports showed that the number of mortgage brokers writing commercial finance loans has increased by almost 15 per cent between the October 2021 and March 2022 period.
[Related: Pepper Money raises 1st $1bn RMBS for 2023]
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