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Published 12 February 2013 11:43, Updated 15 February 2013 13:44
BRW Rich Lister John Kinghorn floated RAMS at $2.50 a share just before the global financial crisis, earning himself a $600 million windfall. Photo: Jim Rice
RHG Ltd, formerly known as RAMS Mortgage Group, has confirmed it has been approached to sell its loan book, with the buyer believed to be non-bank lender RESIMAC.
In a statement to the ASX, RHG stressed the transaction was far from being a done deal. “Discussions are not concluded and there are complex transactional and commercial issues involved,” RHG said.
RAMS was founded by BRW Rich Lister John Kinghorn in 1991 and floated at $2.50 a share just before the financial crisis, earning a $600 million windfall. Its value plunged to as low as 5¢ a share as funding dried up during the crisis, and now sits at 46.5¢ where it was halted yesterday.
Analysts estimated a bid for RHG could be between $150 million and $170 million, according to The Australian Financial Review, with the value of its future franking credits putting it at a premium to its market value of $143 million.
Karl Siegling, portfolio manager with RHG investor Cadence Capital, said investors would be looking at more than just the price offered, and the structure of the offer would also be important.
“I would presume most investors are hoping to receive a stream of fully franked dividends over time as well as releasing the cash and collateral tied up on the balance sheets,” Siegling says.
“It’s a mortgage book in run-off, but it’s running off more slowly and more profitably than we thought.”
Receivers have put a number of loan books to market in recent weeks. The $1.5 million loan book of payday lender Amazing Loans is on the block, comprising more than 650 loans. So is a $32 million portfolio of full recourse loans belonging to Willmott Finance Pty Ltd, for sale by KordaMentha.
“This area was frozen after the GFC and until recently,” Siegling says. “There has been a noticeable change in the past three to four months that loan books are freeing up and people’s ability to borrow money against those loan books has significantly improved, so the books can once again transact. That augurs well for the whole industry.”