SFSF investment activity | April 2020

9 April 2020

The AOFM has received significant interest in the Structured Finance Support Fund (SFSF) and is considering proposals for primary RMBS/CMBS/ABS issuance participation, and investment in securities issued by warehouse facilities.

Consistent with the Directions issued by the Treasurer, maximising third party investment activity in transactions remains a priority. At this stage a focus of SFSF investment is likely to be in mezzanine tranches of term and warehouse transactions.

The AOFM notes that in light of an overhang developing in the secondary market, a distortion in pricing has emerged that is likely to weigh on sponsors’ capacity to attract third party demand to new primary market issuance

To this end, the AOFM will, at its discretion, purchase existing securities from investors who commit to supporting primary market transactions in which the SFSF can invest.

Moreover, the AOFM is now planning other intervention in the secondary term securitisation market with the aim of facilitating new primary issuance. In the interests of transparency, the AOFM is working through the Australian Securitisation Forum (ASF) on a ‘forbearance model’ that will allow for the SFSF to support term and warehouse structures where COVID-19 hardship cases can be shown to be restricting cash flow into securitisation vehicles. More information on the ASF’s work can be found here.

The AOFM’s purchases of primary and secondary term RMBS/CMBS/ABS will be intermediated by members of its investment panel. Instructions on how intermediaries can apply to join the panel can be found here. Members of the investment panel wishing to opt out of investment activity relating to the SFSF should advise the AOFM of this in writing by emailing a letter signed by an authorised signatory to erm@aofm.gov.au by COB Thursday 16 April 2020.