RHG at risk of default
December 21, 2009
The RHG Group - the remnants of the Rams Home Loans Group that was sold to Westpac in 2007* - is involved in a number of court actions with one of its funders which could see them default on around half of its funding portfolio.
The current balance of the facility involved in the court actions is $324 million, but a cross default could be triggered - impacting on around $2.5 billion worth of loan facilities.
“Yesterday RHG had a judgment handed down in regards to whether a loan covenant was breached,” the company said in a statement on Monday. “RHG was unsuccessful in this action and therefore an event of default has occurred in respect of this facility. RHG has today filed an appeal in regards to this judgment.
“This event of default triggers a cross default in certain other loan facilities. RHG has kept these other lenders fully informed throughout the process. The total amount for which there could be a potential event of default through cross default is $2,526 million. In addition to the potential loss of future income of $47 million there is potentially $26.8 million of RHG’s cash used as credit enhancement at risk.”
* RHG was forced to sell their branch network to Westpac in late 2007 owing to the subprime collapse which all but cut off their primary source of funding.