UPDATE: RHG Defaults On A$324 Million Facility, Triggers Cross Default

RHG Ltd. (RGH.AU) said Monday that it has breached a loan covenant on a A$324 million debt facility, triggering a cross default on other facilities that could result in defaults worth a total of A$2.53 billion.

A RHG spokesman, however, said the company's estimate of a potential loss of future income of A$47 million and an additional A$26.8 million in cash as a result of the default is "an absolutely worst case scenario".

"And we're being very conservative in expressing that scenario," the spokesman said.

The mortgage provider, formally known as RAMS Home Loans Group, sold its brand and distribution channel to Westpac Banking Corp. (WBC.AU) in January 2008 after a freeze in global credit markets left it unable to roll over much of its funding.

The New South Wales Supreme Court ruled Thursday that RHG late last year and early this year breached a loan covenant on a A$324 million facility with Germany-based HypoVereinsbank related to mortgage arrears rising above a set level.

RHG is appealing the court's decision but if its appeal fails HypoVereinsbank, a subsidiary of UniCredit SPA (UNCFF) may sell the mortgages to recoup its loan.

-By Ross Kelly, Dow Jones Newswires; 61-2-8272-4692; [e-mail]