Thomson Geer advises on a landmark DCM issuance in the Australian legal market

3 October 2018

News

In a team led by partner, Matthew Reynolds, Thomson Geer is pleased to have advised the issuer, ASCF Managed Investments Pty Ltd (ASCF) with Gilbert + Tobin advising the arranger, Acacia Partners, on a landmark DCM issuance in the Australian legal market which completed in September. The transaction featured an issuance by ASCF, a related entity of Australian Secure Capital Fund Ltd, of A$35 million of five year senior secured notes to fund a pool of short term (1-12 months), low LVR loans secured by registered mortgages over Australian residential property. Gilbert + Tobin also acted for the trustee, EQT Structured Finance Services Pty Ltd.  BGC Fixed Income Solutions, a division of BGC Securities (Australia) Pty Ltd, was lead placement manager for the transaction.

This deal was unique for the Australian wholesale debt capital markets and involved a complex, multi-class note issuance, with the overall structure including elements of a securitisation transaction.

The issuance structure was as follows:

  • A$28.0m (or 80% of total note proceeds) of five year Class A Senior Secured Notes paying 9.0% p.a. (“Senior Secured Notes”)
  • A$4.0m (or 11.4% of total note proceeds) of five year Class B Senior Secured Notes paying 12.0% p.a. (“Mezzanine Notes”)
  • A$3.0m (or 8.6% of total note proceeds) of five year Class C Senior Secured Notes paying 0.0% p.a. (“Equity Notes”)

The Mezzanine Notes and Equity Notes will provide 20.0% (15.0% in the first year) subordination or first loss protection to the Senior Secured Noteholders. The Equity Notes will provide 8.57% (5.0% in the first year) subordination or first loss protection to the Senior Secured Noteholders and the Mezzanine Noteholders.

The first loss/subordination protection is a key credit enhancement feature of the transaction and significantly reduces the investment risk for the Senior Secured Noteholders and the Mezzanine Noteholders.

The transaction was run efficiently, seamlessly and was well-coordinated between all advisers. The success of this unique transaction means greater opportunity for like-transactions, with BGC Fixed Income Solutions already discussing potential future transactions in this space.