Recession seems to have hit RHG quite hard. The company was in deep trouble last year when it was unable to recover debts due to the global economic slowdown. It had to sell its brand, RAMS Home Loans Group, as well as distribution channels, to banking biggie Westpac Banking Corp. in January 2008.
Now, RHG’s loan covenant with Germany’s Hypo Vereinsbank seems to have been affected to the tune of A$324 million. The mortgage levels for the loan agreement have gone beyond the agreed levels thereby compelling RHG to admit to a breach as ruled by the New South Wales Supreme Court on Thursday. However, the company is defensive about its position.
According to them, the estimate of potential loss of future income is at an absolute ‘worst case scenario’. "And we're being very conservative in expressing that scenario," the spokesman said while quoting a figure of A$47 million and an additional A$26.8 million in cash.
RHG plans to appeal against the court’s ruling, failing which, HypoVereinsbank, a subsidiary of UniCredit SPA (UNCFF) is most likely to sell the mortgages.