Commonwealth Bank is leaning on Australian Seniors Finance to attract at least one more wholesale lender to share the financing load after ASF - a prominent lender of reverse mortgages - has been unable to refinance the CBA loan in the debt capital market as once planned.
The Herald Sun reported that ASF has a $325 million finance facility with CBA.
Borrowers through Australian Seniors Finance don't have to make any payments of interest or principal on their loans (though they can opt to do so). This is, of course, the point of reverse mortgages, with the loan repayable when the elderly borrower sells their house and moves, moves into a nursing home, or dies.
The CBA facilities are likely to be re-priced each time they are extended by the bank.
John Thomas, managing director of ASF, told the Herald Sun his company was in talks with CBA and another major domestic bank to extend or refinance the facility for at least another two years.
"We also realise that we will need to access other facilities to continue growing the business."
Thomas said ASF was looking to cut costs by reducing marketing spending and acknowledged the firm may have to slow lending.
The newspaper, citing Australian Seniors Finance financial statements filed with ASIC, reported that the firm posted a net loss of $7.7 million in the year to June 2007. ASF more than doubled its loans to $259 million.
Current liabilities exceeded ASF's current assets by more than $241 million.