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RHG Warns Of Possible Default
Australian non banking finance company RHG limited, which previously made home loans under the brand Rams Home Loans issued a warning that it may have to default on its financing obligations, if it cannot negotiate with creditors over upcoming debt repayment deadlines, or remains unable to sell or securitise a larger portion of its mortgage book.
The non bank mortgage lender, which has already divested the majority of its book to Westpac, recorded full year profits of $120 million, down 4 per cent from the previous year. The company cautioned that as its mortgage portfolio matured over the next few years, revenue and profit would continue to decline.
The board declared there would not be a dividend paid to shareholders for the past financial year.
RHG’s mortgage portfolio is worth $7.68 billion of which $5 billion is financed through warehouse facilities and the remaining part of the portfolio securitised through residential mortgage backed securities.
“The group’s mortgage book is closed and in run-off. The group will continue to manage and service its mortgage book. The group remains in discussion with its various warehouse providers in regards to future maturity dates. However, a high level of uncertainty still remains in the current market, which will likely result in the group selling further mortgages at par in repayment of warehouse facility balances. A default will likely arise if a warehouse cannot be renewed and the mortgages are not sold. The directors are satisfied that any sale of mortgages in repayment of warehouse facilities or an event of default … will not affect the group’s ability to continue as a going concern.” RHG said in a statement to the market.
In previous years, RHG was a major force in the non bank lending market when it operated under the Rams Home Loans brand; however the company has been hard by the freeze in wholesale funding markets, which began nearly two years ago.
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Correction:
This piece initially incorrectly suggested that Rams Home Loans had warned of a possible default, when in fact that company is now a wholly owned subsidiary of Westpac Banking Corporation and neither Westpac nor Rams Home Loans are in danger of default. The company in question is now called RHG Limited, which prior to the sale of the brand to Westpac made home loans under the Rams Home Loans Brand.
We sincerely apologise for any inconvenience caused, and have edited the blog post to reflect the information that was conveyed to us.
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Please find below a Correction that ran in The Australian on Wednesday 2 September.
Correction
A REPORT in The Australian yesterday (”Rams in funding default warning”, Page 21) should not have referred to RAMS Home Loans. The article was in fact about RHG Ltd, which previously sold mortgages under the RAMS brand. RAMS Home Loans is now a wholly owned subsidiary of Westpac and is not in danger of defaulting on its current funding commitments.