Rams in funding default warning
RAMS Home Loans has warned it could default on its current funding commitments, if the group cannot renegotiate looming debt deadlines or sell more of its mortgage book.
The former non-bank lender, which sold the majority of its business to Westpac, booked a $120 million profit, down 4 per cent for the year, but warned revenue and profit would decline as the mortgage book matured in the next few years.
The board declared there would not be a dividend paid to shareholders for the past financial year.
Rams has a mortgage book worth $7.68 billion, of which the majority $5bn is funded through warehouse facilities, with the remaining $2.68bn through residential mortgage-backed securities.
"The group’s mortgage book is closed and in run-off. The group will continue to manage and service its mortgage book," Rams said in a statement to the market.
"The group remains in discussion with its various warehouse providers in regards to future maturity dates. However, a high level of uncertainty still remains in the current market, which will likely result in the group selling further mortgages at par in repayment of warehouse facility balances.
"A default will likely arise if a warehouse cannot be renewed and the mortgages are not sold.
"The directors are satisfied that any sale of mortgages in repayment of warehouse facilities or an event of default … will not affect the group’s ability to continue as a going concern."
The fortunes of Rams, previously a major player in the non-bank lending market, have failed since the wholesale markets started to seize at the onset of the global financial crisis two years ago.
"During the year we were able to roll warehouse facilities at considerably higher margins payable by Rams and with more onerous conditions," the company said.
"These conditions have included the need to provide further subordinated debt and removal of some loan arrears.
"The market for RMBS remains all but closed to Rams."