Pepper Money have priced a non-conforming RMBS transaction, PRS29, to the tune of $750m. It was arranged by Westpac, CBA, NAB and Macquarie Bank.
The pricing represents the lowest price for a A1 note since before the Global Financial Crisis, something which Pepper put down to their strong relationship with investors and the ongoing buoyancy within the housing market.
“Pepper Money funds its consumer lending program via three different platforms – non-conforming (PRS), prime and asset finance,” said Pepper Money Treasurer Anthony Moir. “This non-conforming securitisation or PRS, which stands for Pepper Residential Securities, is a longstanding funding vehicle for the group.”
“Securitisations such as PRS29, provides Pepper with the ability to assist a broker’s customer in achieving their lending goals, whether to purchase a car or home.”
“Our approach is to be a frequent issuer in the capital markets, so that debt investors, both domestic and global can regularly invest in our program, and we can replenish our warehouses with new loans.”
At the end of last week, Pepper moved a step closer to their IPO, launching a float that seeks to raise $450m at $2.89 per share. The non bank lender would be valued at $1.3 billion by such a move.
If it were to happen, it would represent the biggest Australian IPO of 2021 so far. The deal is backed by Credit Suisse, Goldman Sachs and RBC Capital Markets.
Pepper was previously listed on the ASX. Their IPO in 2015 saw them valued at $470m, which grew to $600m within a day of trading. It was removed from the stock market in 2017 after US-based investment firm Kohlberg Kravis Roberts (KKR) bought it outright.
Plans were released at the beginning of last year to return Pepper to the market with a $1 billion valuation, but they were put on hold by fluctuations in market conditions brought about by the COVID-19 pandemic.
As confidence returns and the home loan sector, which provides a substantial part of Pepper’s assets, remains booming, the time seems right for KKR to bring them back to market.
