Troubled home lender RAMS Home Loans Group has failed to finance more than $6 billion in short-term debt two days after it warned that the subprime mortgage mess and credit market strains would have a “material” impact on the company’s earnings.
The news, made in an announcement at 10.33am to the stock exchange, saw the market plunge.
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It had opened around 50 points down but after the RAMS statement, it fell sharply to be off 205 points on the All Ords at midday, and looking to go lower. The fall is far today: 3.8% compared with 3% for all of yesterday.
Almost all the stockmarket’s gains for 2007 have been wiped out.
The company’s shares have today been hammered: they plunged more than 60% to 64c just before midday, with more than 35 million shares traded.
The company had only floated on the ASX on 27 July at $2.50 a share, so the original investors, if they have stayed in, are the heaviest losers on the ASX this year.
RAMS said the “tightening of the global credit markets” was the reason for being unable to sell $6.17 billion of so-called extendable commercial paper, the company’s largest source of funding for its loans.
It said in a statement today that it now has 180 days to refinance the debt, which compared to total debt of $14.17 billion.
RAMS said the lender has been given temporary funding of $1billion by two of its providers, which it did not name.