Snowmobiles on 1 April...

As the lawyers get smarter and the population gets dumber, The April Fools news item is a dying art. In the world of debt markets however, where the opposite is true, We thought we'd give it a go, telling our readers that Snowmobile deals would re-ignite our floundering securitisation market. It turned out to be one of our better articles and with abit of humour, we really engaged our readers. Even, the government's AOFM were good sports, providing us with a sharp, and funny response which they allowed us to publish.

***Snowmobiles to kick-start local ABS market***

A group of Australian investment banks are planning Australia’s first ever snowmobile
securitisation deal in an effort to revive the domestic asset backed securities market.

As demand for RMBS and auto loans has waned, banks are getting creative in attracting investors back to the ABS market and a securitisation of snowmobiles is seen as the perfect asset class to rev-up the market.

Investors have cited illiquidity in asset backed markets as the biggest stumbling block to the market’s recovery. Snowmobiles however operate better in less “liquid” environments.
Banks are eager to test investor enthusiasm for snowmobiles and are planning an off-road show for investors at Thredbo this coming winter. It is unclear as to whether the Australian Office of Financial Management will support the proposed issue, but given the snowfield’s proximity to Canberra, if the AOFM does come through as a cornerstone investor, it should be able to keep a close eye on its investment.

***Note on snowmobiles(1 April 2009)***

Some of our less astute readers may not have realised that the previous story "Snowmobiles to rev up local bond market" was nothing more than an April Fools Day fabrication.

While we have every faith in the recovery of the ABS market, we don’t believe it will be achieved via a snowmobile securitisation. In fact some suggested such a deal would receive an ‘icy’ reception, while others hinted that it didn’t have a ‘snowballs chance in hell’ of succeeding.

The AOFM issued the following statement:

“The AOFM is yet to receive a proposal regarding the transaction. As you are aware, the AOFM is only able to invest in prime RMBS. Therefore our initial thoughts are that only snowmobiles with an annex, canvas or plastic, capable of sleeping at least one person and able to be fully closed to the weather and permanently affixed to land could qualify. We are also concerned that the portfolio may have prohibitive geographic concentrations. The transaction is however not without merit. Accordingly, the AOFM thinks that an on-site due diligence over a long weekend in August is required, timing subject to the quality of the skiing conditions at that time.”

We hope you enjoyed the story. We apologise to any investors that raced out to do their credit work on the Australian snowmobile industry and to the irate bankers who rang around to find out why they were not on the deal.

Apart from one foolish email a year, Insto remains as committed as ever to timely, accurate and insightful reporting on Australian debt markets.