Bottom line is that credit markets may be "improving", but they are a long way from normal. Whatever funds RHG can manage to raise in the near future will be at significantly higher spreads than in the past. So what do they do? - reset their variable rate loans to match their increased COF, (a) and see existing borrowers walk out of the door and refinance elsewhere? or (b), hold the rate unchanged and cop a big reduction in NII? Regardless, their limited ability to raise new money means they cannot write new business. All things point to a rough time for RHG for at least 12 months or so. The insto's that are bailing out would have excellent access to financial data and models to be able to calculate pretty accurately the real cost to RHG of the funding crisis. In the case of punting on RHG to average punter would be advised to follow the money - we are not talking about some spec mining stock who's fortunes can change overnight!
RHG Price at posting:
0.0¢ Sentiment: None Disclosure: Not Held
