Dec 22, 2009

Aussie home lender may default on A$2.5b loans

SYDNEY: RHG Ltd, the Australian home lender, said a court ruling that it breached a loan covenant may trigger defaults on as much as A$2.5bil of debt. The shares fell to a three-month low.

The Sydney-based company defaulted on a A$324mil obligation as a result of the court’s decision, leading to cross-defaults “in certain other loan facilities,” it said in a regulatory statement yesterday.

RHG is appealing the ruling, which may also cause it to lose A$47mil of future income and A$26.8mil of cash, according to the statement.

“The secured creditors may wish to take steps to enforce their security including the appointment of a receiver to the underlying pool of mortgages,” Arthur Karabatsos, a senior analyst at Moody’s Investors Service, said in a telephone interview from Sydney yesterday.

RHG, formerly Rams Home Loans, sold its branch network to Westpac Banking Corp in October 2007 after the US subprime collapse roiled credit markets, cutting off its main source of funding.

The company’s shares slumped 7.1% to close at 59 Australian cents. — Bloomberg