Shares in RAMS have more than halved, with investors panicking because the newly floated home-loans company failed to refinance its short-term debt overnight.
And the broader market is again down sharply. The All Ords was 205.5 points lower at 5596 a short time ago. The fall has wiped out the last of 2007's sharemarket gains.
A short time ago RAMS shares were down 70c to 65c. They were trading at more than $2 this time last week. The company floated at $2.50 a share just two weeks ago.
RAMS said this morning it was unable to complete a funding transaction overnight in the US.
The non-bank lender said a lack of market liquidity meant it was unable to sell so-called $6.2 billion of "extendable commercial paper" - it's main source of funding.
"The company is taking active steps to refinance the programs,'' RAMS said in a statement to the ASX.
RAMS has 180 days to find buyers for the debt. The buyers would get a rate that yields 25 basis points more than the London interbank offered rate. This debt yielded less than the London interbank offered rate only two weeks ago.
If RAMS financing costs rise sharply it could be forced to pass on the increases to the thousands of Australians who have borrowed a total of about $13 billion from the mortgage house.
RAMS said earlier this week that an increased cost of funding will have a material negative impact on its fiscal 2008 earnings forecast.
"The full extent of that effect will be only know when the refinancing has been completed, the result of which will depend on market conditions at the time,'' it added.
RAMS reiterated that it has no US sub-prime lending exposure and that all its loans are 100 per cent mortgage insured.
"The current issues being experienced are as a result of the tightening in the global credit markets and not the performance of the company,'' it said.
"The underlying business of the company continues to operate profitably.''
Source: Daily Telegraph
