Canadian Home Income Plan Corp. (CHIP) launched the first asset-backed debt public debt offering of 2011 Tuesday, and institutional demand proved that investors are hungry for this paper.
The $175-million offering has a five-year term and came at a spread of 138 basis points over Government of Canada bonds. CHIP's last public deal came to market in June, 2010, at 175 basis points over Canadas, demonstrating how much more comfortable investors are with this debt today.
CHIP originates reverse mortgages and was extremely popular before the financial crisis, sometimes offering three series of its asset-backed paper a year. While some other mortgage-related companies, like Xceed, weren't able to withstand the shock stemming from the recession, CHIP continues to churn out new product.
For those who are unfamiliar with reverse mortgages, they are loans taken out against the value of a house. Instead of paying the money back gradually, the mortgage only comes due when you die, sell your house or move out permanently.
RBC Dominion Securities led the offering.