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Asset-backed securities application criteria

This page sets out the application criteria for acceptance of asset-backed commercial paper (ABCP) and asset-backed securities (ABS) in our domestic operations.

Information required

  • Background on the issuer (including all ratings).
  • Details of the issue as provided in an issue notice, prospectus and/or information memorandum. This information should include:
    • full legal name of issuer
    • physical and postal address
    • description
    • issue size
    • issue margin (to bank bill) and any recent pricing
    • assets in the pool
    • liquidity providers
    • pricing convention (full details)
    • currency
    • arranger
    • dealers
    • registrar
    • paying agent
    • term
    • clearing system
    • governing law
    • redemption
    • payments and record date
    • listing (stock exchange if any).
  • Specific details on underlying assets within the pool.

Attestation

Confirm the issue meets the following criteria:

  • ABS must have a long-term AAA rating from at least one acceptable rating agency—this must be a public rating.
  • ABCP must have a short-term A-1+ rating from at least one acceptable rating agency—this must be a public rating.
  • It is issued and registered in New Zealand.
  • The issue is denominated in New Zealand dollars.
  • ABCP and ABS must be lodged and settled in NZClear.
  • The securitised assets must be owned by a bankruptcy-remote special purpose vehicle (SPV).
  • The originator is not in receivership or under moratorium.

General considerations

  • ABCP and ABS are secured over specified New Zealand assets that may include, but are not restricted to: 
    • receivables (invoices, credit cards)
    • commercial mortgage-backed securities. That is, commercial, industrial and rural properties, but not construction and development projects
    • hire-purchase agreements (various durable goods including housewares and motor cars)
    • equipment purchases. For example, industrial equipment, ‘yellow goods’ such as excavators and diggers
  • The assets in the securities must make regular payments; in particular there must be no capitalising loans in the ABS pools.
  • Pools that include other securities and property development assets (including construction, ‘green fields’ development and speculative activity) are specifically excluded.
  • There are no related party loans.
  • Loans may be included in the pool only if the originator has, before loan approval and as part of the loan origination and approval process, documented, assessed and verified the ability of the borrower to meet their repayment obligations.
  • Only loans that are performing may enter the pool (non-performing loans are those that are 90 days or more past due).
  • Issue is plain vanilla.

Originators will be required to regularly update us on the net value of the underlying asset pool and any changes to the assets in that pool.

Right to adjust haircut

We assume the coupon on ABS will be in line with the average yield on the underlying asset pool. We reserve the right to adjust the haircut for securities that do not meet these criteria. We also reserve the right to adjust the haircut for any other reason.

Resident withholding tax certificate

As is usual for securities in NZClear, only NZClear members with a valid resident withholding tax certificate are allowed to hold these securities in the NZClear depository.

Subsequent issues of the same security will not require our approval.

Right of refusal

We reserve the right to refuse an application for any reason and do not have to disclose our reasons. In particular, if the credit rating of the issuer/issue falls below our threshold, then the issue will no longer be eligible in our market operations.

Authorised signatories

Authorised signatories of the issuer must sign the information provided above. We require a list of authorised signatories for the issuer and receive satisfactory evidence both in form and substance that the issuer's authorised signatories have the authority to execute this agreement, any other notice or communication issued about this agreement on behalf of the issuer.

Where to apply

Email applications to [email protected]