Citibank sells A$500 mln RMBS to 21 investors

(For the latest Australia and New Zealand bond news, double
click on [AU/CRD] and then double click on the ID number)

SYDNEY, May 16 (Reuters) - Citibank, the retail arm of
Citigroup (C.N: Quote, Profile, Research), said on Friday it had sold A$500 million ($467
million) of residential mortgage-backed securities (RMBS),
Australia's first RMBS issue this year, to 21 investors.

About 25 percent of the paper was placed offshore, all in
Europe, and fund managers took well over 50 percent of the
entire offer. The issue was three times oversubscribed at the
clearing price.

"We believe this interest is a sign that the credit markets
are starting to clear," said Roy Gori, chief executive of
Citibank.

The Australian RMBS market, the world's fourth largest,
completely dried up in the wake of the U.S. subprime mortgage
crisis, which has sent funding costs soaring.

Citibank paid 145 basis points over BBSW, the highest
margin ever for a triple A rated Australian RMBS and nine times
the margin Citi paid just a year ago for a similar offer.

While a number of Australian lenders have been trying to
sell RMBS this year, Citibank is the only one to make it to
market so far with investors reassured by its brand and scale,
a good pool of collateral and ggod timing.

"I have more faith in a deal originated by a bank than in a
non-bank RMBS," said a portfolio manager who participated in
the offer and asked not to be named.

Australian non-banks lenders, responsible for 20 percent of
the A$57 billion of RMBS issued in Australia in 2007, have been
hit particularly hard by the subprime crisis.

Non-bank lender RAMS became Australia's first high profile
victim of the subprime crisis, when it was forced last year to
sell part of its business to Westpac Banking Corp (WBC.AX: Quote, Profile, Research)
after failing to refinance debt amid the global credit squeeze.

RAMS tried to securitise A$300 million of RMBS last month
but postponed the offer due to a lack of interest.

The key to Citibank's successful offer lied in the
impeccable collateral, carefully picked by Citibank to draw
investor demand.

"It's a very good clean pool," said the portfolio manager.

The pool of loans includes an average loan-to-value ratio
of 51.5 percent, a much better ratio than the standard 60 to 70
percent range pre-crisis.

The seasoning, or average time since the loans were issued,
was 4.1 years, was much longer and therefore safer than the
standard 1-year or less.

The strong investor response was another source of comfort
for the buyers.

"It was three times oversubscribed, this means margins will
probably tighten," the investor said.

He said RMBS margins have been tightening in the past few
weeks, after months of widening.

Key deal details are as follows:

Final maturity: May 16, 2039

Settlement: May 28

Lead: Citigroup

Co-manager: Macquarie Bank

Class Amount Average life Ratings S&P/Moody's Margin

A A$500 mln 2.94-yr AAA/Aaa
+145/1mBBSW
($1=A$1.06)
(Reporting by Cecile Lefort; Editing by James Thornhill)