RHG squabbles with HVB over loan fees

RHG, the former Rams Home Loans, is asking the NSW Supreme Court to reduce fees payable to a subsidiary of HVB, a German bank that provided a rare funding lifeline to the then distressed firm in early 2008.

Reports of the first day of a trial in the court, and published in The Australian and the Financial Review, deal with a controversy over monthly exchange rate fees of up to $1.5 million paid by RHG to Elektra Purchase No 19, a subsidiary of HVB. RHG had been paying between $200,000 and $300,000 a month.

HVB provided a loan of $750 million to RHG in January 2008, a loan structured as a mortgage-backed security and one of the few new sources of funding for the capital market for the firm since Rams' business model crumbled with the onset of the credit crunch five months earlier.

According to the report in The Australian, RHG wants to recover $6.7 million, alleging Elektra has acted in "bad faith" and was being "commercially unreasonable".

HVB sold the $750 million worth of RMBS to Lehman Brothers, which later sold them to Elektra, itself owned by HVB.