Home loans group on track to refinancing

RAMS, which listed in July, ran into trouble in August after a global liquidity squeeze. Photo / Reuters

Australia's RAMS Home Loans Group, which has been trying to refinance debt amid difficult conditions in credit markets, has secured funding to roll over about two-thirds of its maturing US short-term debt.

RAMS, which listed in July, ran into trouble in August after a global liquidity squeeze stopped it from refinancing A$6.17 billion ($7.1 billion) of debt sourced from the US extendible commercial paper (XCP) short-term credit market.

The non-bank lender now has until February 11, 2008, to roll over two XCP programmes worth A$5.5 billion, and has already flagged that the higher costs it faces to secure the refinancing will have a material negative impact on its fiscal 2008 earnings forecasts.

RAMS announced yesterday it had executed documentation for A$3.5 billion in funding, which would be used to refinance about 63 per cent of the A$5.5 billion of commercial paper.

It's also in the advanced stages of documentation for a A$750 million funding facility and "continues to work to find funding solutions for the remaining extendible commercial paper".

"RAMS will update the market if and when these facilities are progressed," it said.

If successful with the latest facility, RAMS will be on track to refinance A$4.25 billion or about 77 per cent of its A$5.5 billion obligations.

The two funding facilities struck on Thursday are for A$1.5 billion, executed through Westpac Banking Corp, and A$2 billion, with another unnamed financial institution.

RAMS said the facilities were subject to various conditions which had to be satisfied prior to drawdown. RAMS shares rose as high as A32.5c, or 8.3 per cent, but closed steady at A30c.

RAMS, which is selling its franchise network and all of the future business it writes to Westpac for A$140 million, also said it had extended two drawn down debt facilities that were were due to expire on Monday.

- AAP