NAB uses innovative solutions to price $1bn RMBS deal for ME Bank

16 April 2012

National Australia Bank (NAB) has priced $1 billion of Residential Mortgage Backed Securities (RMBS) for Members Equity Bank (ME Bank), using an innovative structure which met the needs of both the client and investors.

NAB has been actively exploring ways to diversify investor markets and innovate in alternative markets.

The deal, which offers different securities in various currencies for investors, splits the securities to provide a US dollar tranche of bonds aimed at the US money market investors, a tranche tailored to meet the requirements of fixed rate investors and more traditional tranches targeted for domestic investors.

NAB’s Head of Securitisation, John Barry said he was pleased with the result as it builds on NAB’s structural innovation and expands the non-core currency investor base for RMBS.

“This transaction demonstrates our commitment to develop innovative solutions in the RMBS market that best meet the needs of both clients and investors.

“Through its superannuation members home loans program (SMHL), ME Bank has been an active issuer of RMBS in offshore markets and is highly-regarded by the investor community and has proved to be an ideal issuer with which to re-engage with US investors,” said Mr Barry.

ME Bank’s Chief Financial Officer Nick Vamvakas said he is extremely pleased with the result and NAB’s ability to structure the deal.

“With NAB’s structuring and distribution capability, ME Bank is one of the few Australian financial institutions to attract quality offshore investors post GFC." said Mr Vamvakas.

The capital structure and pricing details are summarised below:

Bond Class Issue Size Currency Security Type Expected Ratings (S&P/Moody’s) Initial Credit Support Coupon Modelled WAL Legal Final Maturity
A1 420.0 US$ Floating rate/ hard bullet A-1+(sf)/ P-1(sf) 7.1% 1m US$ LIBOR + 0.40% 0.9 yr Mar-13
A2 50.0 A$ Fixed rate/ controlled amortisation AAA(sf)/ Aaa(sf) 7.1% 5.27% 3.0 yrs Apr-43
A3 477.5 A$ Floating rate/pass through AAA(sf)/ Aaa(sf) 7.1% 1m BBSW + 1.50% 2.8 yrs Apr-43
AB 46.0 A$ Floating rate/ pass through AAA(sf)/ NR 2.5% 1m BBSW + 2.65% 5.2 yrs Apr-43
B 25.0 A$ Floating rate/ pass through AA-(sf)/ NR Nil Undisclosed 5.2 yrs Apr-43

The AOFM invested A$123.5m in the Class A3 Bonds.

NAB acted as sole arranger and a joint lead manager for both the $US and the $A components of the deal.

Media Sharna Rhys-Jones M: +61 (0) 417 028 942

Elisha Vincent M: +61 (0) 429 566 676