Behind The Wheel For A Capital-raising Deal

Sydney Morning Herald

Saturday July 19, 2008

Danny John

ST GEORGE Bank has packaged up the last remaining car loans on its books into a cash-generating securitisation deal, with European and Australian investors taking more than double the value of asset-backed notes originally offered.

The move has raised just over $1.23 billion for St George, which is its biggest securitisation transaction since a mortgage-backed offering in June 2007.

That deal was significant in that it came just before the global credit crisis caused securitisation debt markets - in particular, the home-loan sector - to go into meltdown. Since then, banks such as St George have turned to spinning off other loans in equally creative ways to raise much-needed capital.

Such was the demand for yesterday's offering that St George more than doubled the initial amount from $500 million as investors lapped up the attractive interest-rate terms, which ranged from 80 basis points to 120 basis points above the prevailing short-term money market rates.

Most of the cash - nearly $1 billion - was raised in Europe, which St George said was a reflection of how well the investment community viewed the strength of the Australian economy despite evidence of the slowdown coming through. This, in turn, reflected the low risk that borrowers would default on their car loans. Most of the St George package is made up of loans taken out against new vehicles, with an average value per individual loan of $21,000. Investors will be able to trade the securities through separate listings on the Australian Securities Exchange. St George expects the two large euro-denominated tranches will gain "triple A" ratings from the main credit agencies, Standard & Poor's and Moody's, in a further sign of the relative financial strength of the offerings.

Jeff Sheehan, general manager of St George's capital markets division - which got the issue away with the support of its lead managers, Macquarie Bank and Royal Bank of Scotland - said the deal reflected the health of the auto-securitisation market compared with the much-troubled housing ones.

"Investors looked at our economy with its pretty low unemployment and [the fact] that people are able to service their loan obligations," Mr Sheehan said.

© 2008 Sydney Morning Herald

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