binh,I didn't say you bought above $1. I said that I have called...

binh,

I didn't say you bought above $1. I said that I have called it correctly from over $1.00.

Regarding your "fund rules", with respect, you have no idea what you're talking about. In the first place, there are no such rules. Fund managers in Australia can (and do) hold shares in all sorts of entities of varying sizes.

Second, all of the substantial shareholders (with the exception of SUN) were completely sold out of RHG before the price dipped below $1.00, when the notional market cap was still approx. $350m. (SUN didn't get out until October, when the price was between $0.80 and $0.60, or market cap of between $280m and $210m). It's not like they were selling out of some micro-cap!

Finally, RHG most certainly will go out of business if they can't refinance their XCP. Tell me, what part of the following (from RHG's explanatory memorandum to the WBC deal) don't you understand?

If the RHG Group is unable to negotiate warehouses to fund its two XCP programs by February 2008, then the RHG Group will lose all (or substantially all) of the economic benefit of the loans forming part of the XCP programs but will continue to be obliged to pay trailer commissions on those loans.

Now, even apart from these XCP programs, they have an additional $5bn of "warehousing" facilities (read: short-term) which expire at various times throughout 2008 and which, I have no doubt, include various default clauses in relation to the failure to refinance the rest of their debt.

Even apart from this risk, there is still the question as to whether or not one of their warehousing banks will get nervous and just not renew. Again, from the WBC EM:-

The Directors’ commercial expectation is that these warehouse facilities will be extended until refinancing by a term RMBS, however, neither the extensions nor the refinancing are certain.

You also need to realize that, in the event that the XCP program can't be refinanced and the noteholders exercise their rights to sell the XCP loan book to the highest bidder (which is not the world's most liquid market, at the moment), RHG have entered into the following arrangement:-

As part of the XCP programs, members of the RHG Group have entered into arrangements with commercial banks to compensate noteholders in the securitised vehicles for the difference between the sale price of the securitised loans and the par value of all performing loans (being principal, capitalised interest and accrued interest). If the RHG Group is unable to refinance the XCP programs, the securitised loans will be sold.

Sounding good to you, yet?

Now, bear in mind that the MBS (read: long-term) debt market is effectively closed, ATM. Therefore, if they were able to roll-over the XCP's it is more than likely that they would only be doing so for another 6-12 months. So, they would need to go through this entire exercise again within a year. Wow! Great fun!

Finally, here's the best part of all. In theory, if there is a firesale of the XCP's, because they can't be refinanced, any shortfall in the price had been "insured" by RHG. This allowed the XCP's to be issued with an A-1+ rating. Now, although RHG never specifically states it, there weren't too many players in this marketplace, before it collapsed. Ever heard of the "monoline" insurers? You know, the ones teetering on the verge of bankruptcy? If RHG have insured with one of these, what do you reckon their chances of getting a pay-out are?

As I said, it's your money. And, one way or another, we won't have long to wait and see who is right and who's wrong. About 6 days and we should have the answer.