Yellow Brick Announces Securitisation Initiative Update

Yellow Brick Road Holdings Limited (ASX: YBR) announced that it has entered into two separate non-binding but detailed Term Sheets relating to the establishment of the securitisation business, funding its initial working capital requirements, and funding the initial A$6 million subordinated/first loss C Note (equity-skin-in-the-game) required for that RMBS Warehouse Facility.

The reference of the current update can be made from an earlier announcement by Yellow Brick Road on September 12, 2018, regarding its negotiations to establish an initial A$300 million RMBS Warehouse Facility, through which it intended to launch its new securitisation initiative.

The first term sheet is with an US$13 billion alternative asset manager counterparty who, in return for a 50% equity interest in Resi Wholesale Funding Pty Ltd (RWF), being the intended trust manager and sponsor of the securitisation business (the other 50% of which is to be owned by YBR), will provide and/or arrange A$18 million in ordinary equity in RWF in two tranches and a facility for a combined A$64 million in future funding for C Notes and/or B Notes for the RMBS Warehouse Facility.

The other term sheet is with a private Australian counterparty, who amongst other things, will provide a back-up facility for another A$20 million in future funding for C Notes for the RMBS Warehouse Facility.

Each term sheet is subject to completion of final due diligence (both of whom have already undertaken significant due diligence) and finalisation of definitive legally binding transaction documentation (the negotiation and drafting of which has also commenced).

The importance of these funding arrangements is that once definitively agreed and implemented, they would satisfy a major commercial condition precedent to the RMBS Warehouse Facility.

Any drawdown of the RMBS Warehouse Facility is subject to YBR completing definitive legally binding transaction documentation with the warehouse lender.

The company’s Executive Chairman, Mark Bouris stated that the current development is a major milestone in their journey to commence a securitisation business in Australia. Mr. Bouris further stated that this has come up at a time when the market is seeking alternative funding for home loan lending in Australia.

In its half-yearly results, YBR reported a net loss after tax (NLAT) at $34.15 million for H1 FY19. This was predominantly driven by a non-cash asset write-off of $33.95 million on the carrying value. It’s underlying EBITDA (excluding non-cash asset write down) was reported as a loss of $2.46 million in H1 FY19 as compared to the profit of $2.1 million in H1 FY18.

On the stock information front, at the time of writing, i.e. (AEST: 03:00 PM on 11 April 2019) the stock of Yellow Brick was reported at a price of $0.067, down 1.471%, with a market capitalisation of ~$19.31 million. Its EPS was reported at A$0.124. Today, its day’s high stands at $0.068, and day’s low at $0.067, with a daily volume of 185,000. Its 52 weeks high stood at $0.145 and 52 weeks low at $0.054, with the average volume of 140,513. Its absolute return for five years, one year, six months, and three months are -88.76%, -49.63%, -38.18%, and -23.6%, respectively.


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