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Rams Home Loans says it will try to sell more mortgage-backed bonds in the Australian market after failing to refinance A$6.18 billion ($7.19 billion) of short-term debt in the US this month.
The Sydney-based company plans to increase its funding from residential mortgage-backed securities in Australia to A$4.07 billion from A$3.8 billion as of June 30, it said.
No Australian lender has sold mortgage-backed securities in the local market since July 27, underscoring the difficulties faced by non-bank home-loan firms in financing their businesses amid the credit crisis.
Rams shares have slumped 57 per cent since its ill-timed listing a month ago, making it an increasingly attractive takeover target.
"Someone like a bank could pick up its good distribution model," said David Goode, a credit analyst at Challenger Financial Services. "Banks have looked at it before, so you would think at half the price they would look at it more closely."
Rams, which touts loans for as much as 100 per cent of the purchase price of a home under the slogan "No deposit? No worries!", started trading its shares the same day the risk of owning corporate bonds soared to the highest on record in the US and Europe.
Rams has 80 branches in New South Wales, Victoria, Queensland and Western Australia. The company started in 1991 as a wholesale finance provider for lenders and expanded its network to serving individuals in 1995. It had A$13.7 billion of loans on its books at June 30.
Rams is struggling to keep financing mortgages because of the rising price of selling debt while banks with a ready source of funding from customer deposits are insulated by comparison.
Rams is already paying investors 25 basis points, or 0.25 per cent, more than the London interbank offered rate on the short-term debt in the US that it has failed to refinance. It paid investors less than Libor in July.
National Australia Bank and ABN Amro Holding are each creditors for about half of this debt, Elizabeth Steenson, a Standard & Poor's analyst in Melbourne said.
Michael Phillip, head of capital markets research at Westpac, said there "still is a question" of whether Rams will successfully refinance this debt.
-Bloomberg
