Bluestone Prices A$350m Sapphire XX 2018-3


In a fantastic end to the year, Bluestone has priced its third RMBS securitisation of 2018, the 20th in the Sapphire program.

Bluestone has priced its third securitisation in 2018 with A$350m Sapphire XX 2018-3, rounding out a fantastic year for the business, which was acquired by Cerberus Capital Management in April and recently achieved $2bn in settlements since returning to the market in 2013. The transaction marks Bluestone’s 27th residential mortgage backed security issuance and 20th under its Sapphire program in Australia.

This transaction also marks the first calls of post-GFC issued securitisations issued by Bluestone on their first possible call dates, with the pools from both Sapphire XII 2013-1 and Sapphire XIII 2014-1 being refinanced into the transaction alongside newly originated loans.

“We are very proud of what the business has achieved in such a short time, and in particular since the investment by Cerberus” commented Campbell Smyth, CEO of Bluestone.  “We are focussed on writing loans responsibly for borrowers who don’t meet the criteria of mainstream lenders, a space which is only growing with the pull back by the majors. This is not however a time to be loading up on risk in portfolios. Although the Australian consumer continues to perform strongly we are seeing weakness in the underlying residential property market and are preparing for this to continue for some time”.

As such, Bluestone is focused on continuing to make the hard decisions that it will look back on in years to come and be thankful they were made. “The conservative portfolios that we have been building give us comfort heading into a time of more price volatility. Although tempting, we have resisted the lure of moving into some of the more risky areas, and have in fact been making the most of the opportunity to incorporate increasing volumes of prime and near prime borrowers at sensible LVRs.”

The Sapphire XX portfolio exhibits attractive characteristics for bond investors with a weighted average LVR of 65.64% with only 11.83% borrowers over 80%. The transaction also shows a greater amount of seasoning due to the inclusion of loans refinanced from the called transactions, with a weighted average seasoning of 49.22 months.The transaction was entirely placed with real money accounts without the need for bank support in any tranche.

Todd Lawler, Bluestone’s recently appointed CFO, commented, “It is great to see the level of investor demand for our transactions. While it is comforting to know that banks are there to support us, it is great to see the whole capital structure being placed with real money accounts. Going forward, the growth in origination will be supported by increased and diversified capital markets activity, with additional warehousing capacity, global risk retention compliant securitisations and other forms of term financing.”

Bluestone is likely to return to the market in Q1 2019 with Sapphire 2019-1 and anticipates two to three transactions over the coming year.