ANZ launches A$1 billion collateralised loan obligation

Arrangers sound out investors in Hong Kong and Singapore before establishing a price bracket for the A$1 billion deal.
In the largest Aussie dollar deal of its kind, ANZ bank has launched a fully funded synthetic balance sheet collateralised loan obligation called Resonance Funding Series 2006-1.

The bank is bundling together 110 corporate loans worth a total of A$1 billion and plans to sell the securitised notes, with an expected maturity of three years, to domestic and international institutional investors.

The note proceeds will be held in a A-1+/P-1 bank account and the interest earned on the deposit together with premium payments paid by the credit default swap to the issuer will be used to pay interest on the credit-linked notes.

The loans in the portfolio are equally weighted with a value of just over A$9.9 million each, and the obligors hail from several countries including Australia (comprising 75% of the portfolio), New Zealand (8%), United Kingdom (8%), United States (4%) and Hong Kong (2%).

The obligors represent sectors such as food and beverage, broadcast and media, construction and real estate, farming and agriculture, and finance.

The notes are being offered in seven tranches from Class A Super Senior notes with a rating of AAA/Aaa to Class G notes with a BB/Ba1 rating. 83% of the notes are in the Class A category.

Pricing is expected to take place during the week of 18 September, but this might be brought forward, says ANZÆs head of securitisation, Alison Gray.

Gray says the bank, and co-arrangers Barclays Capital, are this week conducting a roadshow to Hong Kong, Singapore, London and Dublin to ôsound out the marketö.

ôThere arenÆt any other Australian dollar deals of this size trading in the market so it is difficult to say which way the pricing will go,ö she says. ôIn the US, CLOs tend to price in the high 20bps over Libor, but there is no telling how an Australian dollar deal will compare. That is why we are soft sounding the market.ö

Gray says official price guidance will be announced next week.

She says the notes are being offered in seven tranches to appeal to different investor groups. ôWe expect the notes will sell to a mixture of investors from fund managers and banks to insurance companies. There are a lot of mezzanine debt funds that have expressed interest in the lower-rated tranches.ö

All of the loans in the portfolio have an investment grade rating, with about a third holding an external rating from the agencies, and the rest being ômappedö to investment grade. ôThe agencies came into ANZ and conducted due diligence on our internal risk models and then assigned an investment grade rating to the loans without an existing rating,ö says Gray, explaining the mapping process.

Collateralised loan obligations are fairly new to the Australian scene. ANZ is the second large domestic bank to issue a CLO. Last year National Australia Bank completed a $1.2 billion deal in the US dollar market called Southern Cross.

ôThese are balance sheet management tools that transfer bank risk to third-party investors,ö says Gray. ôThey are more capital efficient the larger they are which is why we are issuing A$1 billion in notes.ö
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