rams has refinanced, page-34

not looking good maties.

SYDNEY, Sept 26 (Reuters) - Australian mortgage lender RAMS Home Loans Group Ltd RHG.AX is planning a A$250 million ($219 million) residential-mortgage-backed securities (RMBS) issue, the first since it got caught up in the global credit crunch.

Moody's Investors Service said RAMS would start marketing the RMBS offer on Wednesday.

However, RAMS said later that the planned offer had not yet been priced and there was no certainty that it would proceed.

RAMS was a high-profile Australian victim of the fallout from the U.S. subprime mortgage crisis when the subsequent drying-up of liquidity in credit markets saw it fail to refinance A$6.17 billion in debt last month.

Its shares, which were only listed on the Australian stock market in July, tumbled and are some 60 percent below their initial public offer price of A$2.50, though they rallied 4.2 percent to A$0.99 on Wednesday.

The sharp fall has spurred speculation about a takeover.

Analysts said the securitisation offer wouldn't solve all RAMS' problems.

"RAMS faces a very big strategic issue about the future for the business and has to figure out how it can remain competitive when its funding costs are so much higher, and people are not prepared to roll over commercial paper," said Craig Saalmann, a credit strategist at JPMorgan.

NabCapital and Royal Bank of Scotland, which are jointly managing the bond sale according to market sources, declined to comment on the offer.

The issue would be only the second mortgage-backed offer in Australia since the the credit turmoil started in July. Last week, a unit of Macquarie Bank Ltd (ASX: MBL.ax) offered A$500 million in RMBS.

RAMS will be the first non-bank lender to issue RMBS since the start of the credit crunch, and the issue will be a test of investors' fragile appetite for corporate debt in Australia.

Like other non-bank lenders, RAMS used to borrow money in the short-term commercial paper market and lend it to home buyers for a longer duration. But the credit market problems pushed up borrowing costs and virtually shut down the commercial paper market.

"RAMS will have to increase its interest rates or reduce the volume of business they do. The writing is on the wall," Saalmann said.

One portfolio manager who buys mortgage securities declined to participate in the RAMS offer because low-documentation loans are included in the loan pool. He said he preferred pools with fully verified loans, a sentiment shared by a number of fund managers.

The new issue, called RAMS Mortgage Securities Trust Series 2007-3, will have three tranches and is expected to price by Oct. 3, according to documents sent to investors and seen by Reuters.

Price guidance on the top-rated tranche is 53 basis points over BBSW, according to two fund managers.

Final maturity is Oct. 22, 2039 with a call date of Oct. 22, 2012 or when 20 percent or less of the principal remains outstanding. Settlement is expected on Oct. 10.

The pool includes loans with an average loan-to-value ratio of 66 percent. The loans have an average time since issue, or seasoning, of 29 months and low-documentation loans represent 18 percent of the pool. Interest-only loans comprise 30 percent of the pool.

Mortgage insurance is provided by Genworth Financial Mortgage Insurance Pty Ltd with 24 percent, PMI Mortgage Insurance Ltd with 40 percent, Prime Insurance Group Ltd with 35 percent and Housing Loans Insurance Corp with 1 percent