Not A Bleat: Rams Investors Meekly Accept Their Fate

Sydney Morning Herald

Tuesday November 27, 2007

Danny John

THEY arrived and left like lambs to the slaughter. Herded into the conference room at Sydney's Masonic Hall and shorn of almost all value, shareholders in Rams yesterday handed over the best known part of the briefly listed mortgage lender without a hint of anger or protest.

Resigned to the inevitable, that nobody but Westpac wanted a business that has been crunched so hard by the global liquidity crisis, investors voted by almost 12-1 to sell the brand and its franchise operations to one of the banks it had vowed to go head to head with when it first set up in 1991.

Yesterday's annual meeting was not the bloodbath some market watchers had expected. But an abbatoir couldn't have done a better job of gutting Rams to the bone.

Of the four resolutions put to the 100 or so shareholders who bothered to turn up, the chairman and founder, John Kinghorn, said the saddest one of all was that authorising a change in the company's name from Rams to RHG Group.

As the company's biggest shareholder with 20 per cent, even after selling down $650 million worth of stock before listing just four months ago, he was duty bound to vote in favour, given the lock-in terms to which he and Rams's directors had agreed as part of the deal with Westpac.

Neither did he nor his band of small and institutional investors have any choice but to say yes to Westpac's offer of $140 million for the main business, given his own startling admission to the meeting that Rams "is no longer a going concern".

It is the closest the company has come in three months of trying, but failing, to refinance $6 billion of loans from global credit markets to publicly accepting that Rams is a business almost in name only. And now it doesn't even have that.

Mr Kinghorn remained hopeful that its attempts to replace its once-cheap sources of borrowings with new debt will eventually succeed, albeit at a much higher cost which will inevitably eat into what profits it has left.

"It is inconceivable that the [credit] markets will be closed forever," he told the subdued gathering.

That, though, was of little comfort to his shareholders who, at this point, will get virtually nothing from Westpac's $140 million and only a promise of a full distribution of any surplus cash from the run-down of its remaining $14 billion mortgage book with which the rump of Rams is left.

They, of course, can sell their shares. However, at yesterday's closing price of 29.5c, those investors who bought in at $2.50 at the end of July are facing an 88 per cent loss on their investment.

But not even that was enough to prompt a despairing question or comment about shareholder value from the floor.

Mercifully, for Mr Kinghorn and his fellow directors at least, it was all over in half an hour flat.

© 2007 Sydney Morning Herald

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