Firstline Reviews: HMB’s 200 Million CMO Offering!
Summary
Home Mortgage Bank (HMB) is offering TTD 200 million in Collateralised Mortgage Obligations (CMOs). A CMO is a mortgage-backed security representing beneficial ownership interest in a pool of mortgage loans. HMB will effectively package cash flows from a pool of 538 mortgages that it purchased from originator Trinidad & Tobago Mortgage Finance Company Limited (TTMF) for sale to investors as Certificates. The Certificates will be segmented into Tranches, each with a different term to maturity, interest rate and risk profile. The real estate securing each mortgage acts as collateral for this offering, CMO 2019-01. The Prospectus, CariCRIS report and Subscription Form are available here.
CMO 2019-01 is HMB’s third CMO issue; the previous two issued successfully in 1999 and 2000, respectively, totalling TTD 176.7 million. We’ve learned anecdotally that HMB took up some TTD 5 million residual upon the final maturity dates of these CMOs. The combined value outstanding as at 31-Dec-17 was TTD 2.5 million.
We conclude that CariCRIS’ findings are sound, as are our outlook for relevant macroeconomic indicators and relative valuations to secondary market bonds. The tranches are suitable for investment grade, TTD-denominated fixed income allocations. We therefore recommend a BUY.
Description
| Sector (GICS) | Financials | Issue Size | TTD 200,000,000 |
| Industry (GICS) | Mortgage REITs | Minimum Investment / Increment | TTD 5000 / TTD 1000 |
| Issue Type | Public Offering | Purpose | Financing |
| Prospectus Date | 7-Feb-19 | Structure | Tranches |
| Issue Closing | 27-Feb-19 | Issue Price per Tranche | 100 |
| Issue Date | 1-Mar-19 | Coupon Type | Floating |
| Extendible Period | 2 Weeks | Reference Rate | TTMF Mortgage Market Ref. Rate |
| CBTT Statutory Fund Approval? | Yes | Reference Rate Reset Frequency | Quarterly |
| Trustee | TTMF | Last MMRR (%) | 7.00 |
| Administrator | TTMF | Administration Fee (%) | 1.00 |
| Issuer | HMB | Payment Frequency | Monthly |
| Registrar & Paying Agent | HMB | Payment Type | Sequential Amortising by Tranche |
