By Paulina Duran
SYDNEY, April 9 (Reuters) - Non-bank lenders in Australia's asset-backed securities market, one of the biggest in Asia outside of China, are struggling to revive deals sidelined by the coronavirus pandemic even after the federal government unveiled a bond-buying program.
Deals planned by Pepper Home Loans, Resimac Group, and Metro Finance worth over A$1.5 billion ($931.05 million) are on hold due to the uncertainty, said three market sources who declined to be identified because they were not authorised to talk to the media.
Only non-bank lender Firstmac, who started working on its own deal weeks before the liquidity crisis hit, was able to revive its fundraising last month, thanks to the government's A$15 billion buying program earmarked for asset-backed bonds.
"A lot of managed funds are seeing very high redemptions and money is difficult to find," Firstmac Chief Financial Officer James Austin said.
"It's almost like a game of jenga, conditions are extremely volatile," he said of the circumstances surrounding the deal.
The federal government, through its financing arm, the Australian Office of Financial Management (AOFM), invested A$189.2 million in the deal, including buying the second most senior tranche at less than half the margin Firstmac was willing to pay - a stark show of support.
In previous buying programs, the AOFM would only buy the most senior parts of new securitised transactions.
Despite AOFM support for deals, investors are concerned that new bond securities - backed by home, or car, loan repayments - might not have enough liquidity to pay interest to investors even after home or car owners tap into government relief measures linked to the impact of the novel coronavirus. had also been extreme price drops in existing bonds and investors were more willing to buy those bargains than support a new transaction, a separate investor said.
A A$750 million mortgage-backed bond raising by the banking unit of AMP Ltd AMP.AX also remains on hold, one of the sources said.
On Thursday, the AOFM said it would start buying securities from the secondary market and was working on a proposal from the industry to provide a liquidity facility to fund interest payments in case that lenders are forced to grant holiday periods to home owners impacted by the health crisis.
"Pepper is in direct dialogue with the AOFM on how the business can best avail itself of these opportunities, and looks forward to continuing those discussions in the near future," a spokeswoman said.
Representatives from Resimac and Metro did not return requests for comment. AMP declined to comment.
($1 = 1.6111 Australian dollars)