U.S. News

Australia's RAMS Sees Impact If Debt Volatility Continues


Australian mortgage lender RAMS Home Loans Group said on Tuesday it could be negatively impacted if current volatility in global debt markets continued, sending its shares down 20%.

In a sign of the growing global impact of the U.S. credit market troubles, RAMS said in a statement it was too early to determine the extent of any impact on its fiscal 2008 earnings, but it could be material if current market conditions continue.

"RAMS confirms it has no sub-prime lending exposure and all of its loans are 100% mortgage insured," the company said, adding that its settlement volumes continue to be strong and in line with forecasts.

RAMS' shares tumbled 20% on the news to A$1.40, in a flat overall market. 

RAMS' comments take the number of Australian institutions affected by the global credit squeeze to four. 

Earlier this month, Macquarie Bank flagged losses of up to 25% in its two debt funds, while two hedge funds, Basis Capital and Absolute Capital, suspended withdrawals to avoid a firesale of assets.

Macquarie Bank shares were down 0.4% at A$71.25 -- down about 28% from their all time of A$98.64 reached in late May.

RAMS's loan book stood at A$14.16 billion as of Aug. 10. It said the extendible commercial paper market -- one of its funding sources -- in the United States has been experiencing unprecedented disruptions in recent weeks, resulting in material increases in spreads and shortages of liquidity.

Upheaval in global credit markets has sliced RAMS shares price by 40% in since its listing on July 27. A rival mortgage lender, Liberty Financial, has reportedly scrapped plans to float.

RAMS' initial public offer raised about A$700 million through a sale of shares at A$2.50 each.