REFILE-Australia's RHG to extend RMBS maturities-sources

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(Changes RAMS to RHG throughout, to make clear company has
changed its name)

SYDNEY, May 20 (Reuters) - RHG Ltd (RHG.AX), Australia's
first major victim of the subprime mortgage crisis under its
previous name of RAMS, plans to extend the maturity of some
residential mortgage-backed securities (RMBS), a market source
said on Tuesday.

Analysts say the global credit crunch has all but cut off
RHG's access to new funding, meaning it is cheaper for RHG to
pay penalties to extend existing maturities rather than issuing
new securities as it normally would.

On its RMS Trust 2002-1 issue, RHG is proposing to pay 85
basis points (bp) over 90-day BBSW until April 2010, up from 39
bp currently, for A$187 million of class A3 notes, and 100 bp
on A$45 million of class B notes.

This is about half RHG would pay if it issued new RMBS,
according to a trader who asked not to be named.

Under the original terms of the issue, if investors reject
RHG's proposal, the notes will pay even less, since the initial
penalty margin was set at 78 bp.

"What option do I have as a holder? I am caught between a
rock and a hard place," said a portfolio manager who asked not
to be named.

RHG's plans to extend the maturity of some of its RMBS
issues to gain time until market conditions allow it to buy
back the notes and re-issue new securities, according to a
market participant.

"RHG has no choice and I would do the same thing," he said.

RHG plans could set a trend for Australia's struggling
non-bank mortgage lenders, analysts say.

RHG is the first non-bank lender since the credit crunch
hit last year to leave untouched mortgage-backed securities
that are usually called.

"It varies a lot from issuer to issuer, but in this
environment it could be possible to see issuers extend the
maturity on their RMBS issues," said Kate Thomson, director of
structured finance at Standard & Poor's.

Australian non-bank lenders, responsible for 20 percent of
the A$57 billion of RMBS issued in Australia in 2007, have been
hit hard by the subprime crisis. Unlike banks, they don't have
the luxury of retail deposits to fund their operations and rely
entirely on the capital markets.

RHG, which has over A$4 billion of RMBS issues outstanding,
was forced last year to sell part of its business to Westpac
Banking Corp (WBC.AX) after failing to refinance debt amid the
global credit squeeze.

Investors have been wary of the name since then, voicing
concerns about RHG's future and its servicing operations.

"It's just a story that is too hard to sell at the moment,"
a portfolio manager said.

RHG tried to securitise A$300 million of mortgages last
month but postponed the offer after investor meetings were
cancelled in Europe.
($1=A$1.05)
(Reporting by Cecile Lefort; Editing by James Thornhill)