On Thursday, South African Home Loans (SAHL) will kick off its investor roadshow to raise between R2.5-billion and R3.0-billion in its fifth-ever issue of residential mortgage-backed securities (RMBS) via its Thekwini-5 vehicle, SAHL Finance Director Chris Harrison told I-Net Bridge on Wednesday.

SAHL is a small player in the local R320-billion mortgage market, with a market share of about 4.7%. However, it was one of the very first to issue RMBS, which are debt securities backed by mortgage payments due to a lender, via its Thekwini-1 issue about four years ago.

The group's last issue of RMBS amounted to R2.5-billion in June 2004. Should the company meet its maximum R3.0-billion target in its latest issue, it will have a total of R9.5-billion in securitised debt in issue.

SAHL's Thekwini-5 issue will comprise three tranches of notes, Harrison confirmed, all with a standard 25-year maturity, with the largest AAA-rated tranche making up 94.5% of the total issue. The second A1-rated tranche will comprise 3.5% of the total issue, and the third tranche, rated Baa2, will make up the balance of 2%.

The notes have received two credit ratings, from international ratings agencies Moody's and Fitch.

Following the investor roadshow, the bookbuilding for the issue is set to take place on February 7, and settlement will be February 21.

Harrison said that SAHL had seen that the credit quality of the mortgages had been improving all the time between the first Thekwini-1 issue and the current issue.

"What is different today is that we now have a normal distribution across all five provinces, whereas with Thekwini-1 we were overweight mortgages in Western Province," he explained. "But we have maintained good credit standards, despite the 37% increase in property values in 2004 alone. The loan-to-value ratio is still very conservative at 62%, and the payment-to-income level is at 17%."

He said the group had been able to achieve this by attracting slightly higher income earners as its clients.

"We only have a small share of the mortgage market, but we want to keep it that way," he commented. We are focused on client service, and if we provide that the market share will follow. Our business model is based on never having more than a 10% share, and if we chase the market, our credit quality could be called into question. We need to ensure we keep the quality of our mortgage pool consistent across our issues."