Bottom Line: NHL for the brave

TALK OF a housing recovery in 1994 may not do much for already highly-priced building shares. But brave investors seeking a glory-or- bust punt could look at National Home Loans, the mortgage lender being led skilfully from the crack of financial doom by Jonathan Perry, previously a merchant banker with Morgan Grenfell.

NHL pioneered 'securitised' mortgages in the 1980s, lending money it borrowed on the money markets and then packaging the mortgages as securities to sell institutional investors.

After a few profitable years, a combination of high interest rates and too many high-risk loans crippled NHL and forced it to stop lending. It lost pounds 159.4m in 1992 and pounds 36.6m in the year ending last September.

This will be a crucial year for NHL. It is making profits once more, heading for perhaps pounds 10m. More importantly, it plans to begin lending again.

Before it does so, it will need a refinancing to repair its bombed- out balance sheet and enable it to lend on competitive terms.

It will not be easy. NHL's borrowers have had to pay some of the highest interest rates in the market, as the company felt unable to pass on rate cuts because of its financial problems. Its name is mud with many of the brokers on whom it relies for customers.

However, falling interest rates give wholesale lenders such as NHL an advantage over building societies, which must attract high street deposits.

Ordinary shareholders will be diluted in the refinancing, but the shares could still be worth buying at 8 1/2 p. Better still might be the convertible preference shares, which have already risen to 36.5p on hopes of NHL's renaissance.