Posted on Monday, 21st December 2009 by admin
A default on $324 million in listed mortgage owner RHG Ltd’s loans used to finance mortgages has exposed the lender to the risk of being in default on a further $2.5 billion in loans – or one third of its total portfolio of mortgages.
RHG Ltd said such a default would threaten $47 million in future income and put at risk an additonal $28.6 million in cash RHG used to improve the credit worthiness of its loan portfolios.
‘‘This event of default triggers a cross default in certain other loan facilities,’’ RHG said in a statement.
RHG said it had kept its other lenders fully informed about the issue.
‘‘The total amount for which there could be a potential event of default through cross default is $2,526 million,’’ the statement said.
It is the first time RHG has revealed the full extent of cross-collateralised loans affected by the court case.
A default exposes RHG to the potential that lenders retrieve their mortgages from RHG and sell them off for repayment of their loans.
When the stock resumed trading it plunged to 46 cents from 64 cents when it was placed into a trading halt on Thursday, and was recently at around 52 cents.
The revelations were contained in a release to the market this morning after the NSW Supreme Court ruled on Thursday last week a default had occurred on $324 million in notes used to finance a package of mortgages.The court found RHG Ltd had been in default on a loan from its German lender, HVB, on October and December last year and January this year.
RHG said today it had launched an appeal against the finding of default. RHG is also waiting on a judgment in an unrelated appeal about a disputed payment of $10 million, also to HVB.
swashington@smh.com.au
SMH
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Tags: Loans
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