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Pepper Australia buys A$5.1b of mortgages from GE Capital including the former Wizard Home Loans book

Pepper Australia buys A$5.1b of mortgages from GE Capital including the former Wizard Home Loans book

Mortgage lender Pepper Australia is buying A$5.1 billion worth of Australasian home loans from GE Capital in a deal that includes loans from the former Wizard Home Loans book and a total of A$800 million worth of mortgages in New Zealand.

The deal also includes A$4 billion worth of "prime" home loans in Australia and A$300 million of Australian "specialist" (non-performing) home loans, GE said. Pepper describes itself as a wholly‐owned subsidiary of Pepper Group (Singapore) Pte Limited, a Singapore-based investment holding company.

Read GE's statement below:

GE Capital Australia and New Zealand has today signed an agreement to sell approximately $5 billion dollars in mortgages to Pepper Homeloans, in a sale that marks the final phase of its withdrawal from its home lending business in Australia and New Zealand.

“This transaction aligns with GE Capital’s strategy to become Australia and New Zealand’s leading specialist financial services provider,” said Skander Malcolm, President and CEO, GE Capital Australia & New Zealand.

The sale will be a mix of home loans from the original Wizard Home Loans mortgage book, (rebranded to AMS Mortgage Services (AMS)), and GE Money home loans originated through third parties such as mortgage originators, brokers and aggregators.

The future

“When we announced our exit from home lending in late 2008, we made a pledge to focus on those parts of the business that are our core strength and in which we have scale.

“This has proven to be successful for GE Capital. Locally, we have eight strong businesses in Australia and New Zealand where we are the leading provider of credit cards; aviation finance and fleet management and leasing. We also specialise in personal loans, corporate and structured finance; inventory finance and insurance services. We have scale, strong partnerships, and deep product and industry expertise in these businesses,” Malcolm said.

This transaction is expected to be completed in the coming months and all customers with GE Capital funded mortgages will be advised upon the completion of the sale.

And here's Pepper's statement:

Australian specialist mortgage lender, Pepper Australia Pty Limited ("Pepper") has today signed definitive agreements to acquire the approximately A$5.0 billion residential mortgage portfolio originated by GE Capital Australia and New Zealand.

The acquisition is one of the largest whole loan transactions in Australian history.

Pepper Executive Chairman, Mike Culhane, said, "The acquisition of this loan portfolio is transformational for Pepper and enables us to grow assets under management quickly at a time when non bank lenders are seeking to grow their market share, rebuild a competitive marketplace, and broaden the choice of home lending options for Australian consumers".

The acquisition of the GE Capital home loan portfolio will accelerate Pepper’s expansion into niche segments of the prime residential lending market in Australia and New Zealand.

Pepper Managing Director & CEO , Patrick Tuttle, commented, “The acquisition accelerates Pepper’s long‐term growth plans within the Australian and New Zealand residential lending space. It presents us with a unique opportunity to further expand our existing business model into prime residential lending, extending our specialist product suite. This enhanced offering will be leveraged through our growing national broker distribution networks, utilising our core credit underwriting and loan servicing expertise.”

“The purchase of the GE Capital home loan portfolio will enable Pepper to drive significant economies of scale and technology enhancements across our mortgage origination and third‐party loan servicing platform,” he added. Backed by a consortium of institutional banks and mezzanine investors, Pepper will initially acquire the GE Capital home loan portfolio through a series of warehouse financing facilities.

Mike Culhane commented,  "The support of our senior facility providers, Commonwealth Bank of Australia, National Australia Bank and Westpac Banking Corporation, as well as mezzanine investors comprising Deutsche Bank AG, Varde Partners Asia, York Capital Management, IFM’s Alternative Fixed Income Fund, and MKM Capital has been instrumental in enabling Pepper to finance this milestone transaction”.

He added, “Pepper plans to issue a series of residential mortgage‐backed securities (RMBS) deals over the next few years, subject to prevailing market conditions. Since 2003, we have successfully issued around $2.5 billion of RMBS transactions through our Pepper Residential Securities (“PRS”) programme”.

Since launching in Australia in early 2001, Pepper has built a strong reputation for its expertise in originating and servicing high quality residential mortgage assets.

During the past 10 years Pepper has consistently demonstrated superior performance both in the quality of its own lending and the improvement in performance of portfolios it has managed on behalf of third parties.

"Pepper's robust performance during the GFC has given our funding partners the confidence to back our ability to take on an acquisition of this size. Our focus on technology and a tailored customer experience will ensure that all our customers receive the highest level of service," Tuttle said.

See more on Pepper here.

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