Press Releases

PEPPER ACQUIRES FIRST PERMANENT LOAN PORTFOLIO - 29 June 2010

Pepper Australia Pty Limited (“Pepper”) has today announced that it has acquired a portfolio of residential mortgage loans from Permanent Custodians Limited in its capacity as trustee of the First Permanent Securities Mortgage Warehouse Trust 2000-1 (“FP Warehouse Trust”). Pepper has also purchased the Class F Certificates, residual income units and residual capital units in the FP Warehouse Trust and the First Permanent Super Prime RMBS Trust 2006-1 (“FP RMBS Trust”).

The total loan portfolio held within the FP Warehouse Trust as at 31 May 2010 was $69.1 million. The portfolio balance held in the FP RMBS Trust at the same date was $40.1 million. It is Pepper’s current intention, as the new holder of the residual income and capital units, to exercise its call option over the FP RMBS Trust on 6 July 2010 which means it will acquire a combined loan portfolio of A$109.2 million.

The loans were originated by First Permanent Financial Services Pty Limited (“First Permanent”) which ceased originating new loans in May 2008. Whilst in operation, First Permanent was Australia’s only specialist high loan-to-value (“High LVR”) mortgage lender. To ensure the quality of the mortgage assets, First Permanent assembled a team of underwriting specialists focused solely on origination of high quality, high LVR home loans.

First Permanent was established in 1994. In 2009, First Permanent transferred its roles as servicer and trust manager to the FP Warehouse Trust and FP RMBS Trust to Pepper and BNY Trust Company of Australia Limited (“BNY”), respectively.

“This is a milestone transaction for Pepper”, said Managing Director & CEO, Patrick Tuttle. “We have undertaken extensive due diligence on the First Permanent loan book over recent months which confirms it to be one of the best underwritten loan books in the country. First Permanent has applied stringent credit criteria and property valuation processes to these loans, ensuring they were only made to borrowers with stable debt servicing capabilities”, Tuttle said.

First Permanent’s typical target market were first time home buyers who had not yet had time to save a deposit but who could demonstrate evidence of a reliable income stream (at least for 2 or 3 years), had sound credit histories, and had potential for high future income growth. They also made loans to high income investors seeking full debt leverage on a stand-alone security property.

All mortgages in the portfolio are first ranking registered mortgages over real property positioned in good locations within metropolitan and approved regional areas (with populations in excess of 35,000 people). The majority of the mortgage pool is located in Victoria, New South Wales, Queensland and South Australia.

The loans within the First Permanent portfolio continue to experience low levels of arrears with only 3 loans in the 30 Day + delinquent buckets as at 31 May 2010. Historically, the RMBS transactions originated by First Permanent have shown consistently strong performance even when compared with the Standard and Poor’s (“S&P”) Prime SPIN Index which measures 30 Day + delinquencies across all Australian Prime RMBS transactions.

According to Patrick Tuttle, “Pepper’s expertise as a specialist mortgage lender and third-party loan servicer makes us well placed to assess and value whole loan opportunities of the kind presented by this First Permanent transaction”. He added that, “Pepper will continue to explore opportunities to acquire loan and other asset portfolios which complement our credit, third-party servicing and debt capital markets skills”.