FirstMac to buy back RMBS bonds
Australian-owned mortgage funder, FirstMac Limited, has offered to buy back the outstanding residential mortgage-backed security (RMBS) bonds issued in the firm’s Bond Series 2-2004 Trust.
The bond series was issued in August 2004 for a total of $500 million and has an option for FirstMac to exercise a clean up buy back, or call, when the outstanding principal on the bond reached 20 per cent of the original issue.
The buyback will be made on 22 August 2011 when the bond will have around $95 million in principal capital outstanding. The margins of the bonds are materially below current market funding costs.
“We are honouring all call commitments in our deals as they were originally sold, despite the fact that new funding will be more expensive for the company,” FirstMac managing director Kim Cannon said.
“Investor support and FirstMac’s reputation are more valuable than the short-term pricing benefits alternatively available in this deal,” he added.
Cannon acknowledged the immediate financial cost to the company, and said, “While it is difficult to measure the tangible benefit of our actions, we believe the value will be proven through market support”.
FirstMac has taken voluntary action on six separate RMBS transactions since the global financial crisis.
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