Today National Australia Bank (NAB) announced that it has purchased $1 billion worth of mortgages originated by RHG, formerly known as Rams Home Loans Group, therefore helping RHG repay its debt.
RHG listed on the ASX in July 2007, and has been one of Australia's highest profile victims of the US subprime mortgage crisis.
In August last year RHG fell into trouble when global liquidity pressure prevented it from refinancing $6.17 billion of debt sourced from the US extendable commercial paper (XCP) short term credit market.
Like other non-bank lenders, RHG borrowed money in the short-term commercial paper market to lend to home buyers for a longer duration. The outcome was inevitable: when that short-term funding dried up, RHG was in hot water.
Since then, the mortgage lender has struggled to find ways to refinance a $5.5 billion loan book debt.
In October 2007 it agreed to sell its brand and distribution business to Westpac for $140 million and announced today that it will use other funding commitments worth $3.5 billion and a $750 million in securitised mortgage loans to refinance the rest of its XCP debt.
NAB said the residential mortgages it bought are prime and insured.
NAB shares rose 1.5 percent to A$33.30 and RHG jumped 23.9 percent to $0.285. The broader market .AORD gained 1 percent.
