Challenger to price A$ AAA-rated RMBS at 135bp/BBSW

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SYDNEY, Dec 3 (Reuters) - Australian non-bank housing
lender Challenger Mortgage Management is expected to price
A$750 million ($483.2 million) of residential mortgage-backed
securities (RMBS), on Wednesday, according to market sources.

Preliminary pricing of the triple A rated tranche suggests
a margin of 135 basis points over BBSW, they said.

The size of the offer was initially set at A$750 million
but it may vary, one of the market sources said.

The Australian government will invest A$500 million in the
offer as part of its A$8 billion RMBS purchase plan announced
earlier this year, aimed at injecting much-needed liquidity
into the non-bank home loan market.

The deal, called Challenger Millennium Series 2008-2 Trust,
will carry three tranches and is lead-managed by the
Commonwealth Bank of Australia, Macquarie Bank and Royal Bank
of Scotland.

The issuer is a unit of Challenger Financial Group Ltd
(CGF.AX).

The issue pool includes loans with an average loan-to-value
ratio of 67 percent, according to Fitch. The loans have an
average time since issue, or seasoning, of 28 months. Interest
only loans comprise 49 percent of the pool and low-doc loans 10
percent.

Non-bank lenders have suffered greatly since the U.S
subprime mortgage crisis because they are reliant solely on the
securitisation market to fund their operations.

Preliminary details of the offer are as follows:

Class AMOUNT RATINGS PRICE FINAL

(MLN) (S&P) TALK MATURITY

A A$720 AAA +135BP/BBSW NOV 2039

AB A$17.25 AAA undisclosed NOV 2039

B A$12.75 AA- undisclosed NOV 2039
($1=1.552 Australian Dollar)
(Reporting by Cecile Lefort)