All Topics / General Property / SMSFs set to lose $27 million in collapse of mortgage finance lender

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  • Profile photo of BigCubezBigCubez
    Participant
    @bigcubez
    Join Date: 2012
    Post Count: 48

    SMSFs set to lose $27 million in collapse of mortgage finance lender

    SHARESelf-managed super funds are the main victims of the collapse of Queensland company Wickham Securities.

    PPB Advisory was appointed just before Christmas as administrator of the mortgage finance lender, which provides funds for borrowers buying or refinancing commercial property.

    Wickham issued notes through Bendigo and Adelaide Bank's Sandhurst Trustees by way of a public prospectus that drew in $27 million in investment from around 300 investors.

    Now, administrator Grant Sparks told SmartCompany, those 300 unsecured note holders are owed $27 million, making up the substantive part of Wickham's debt.

    "The vast majority of those note holders are superannuation funds and most of them are self-managed funds," he says.

    Sparks says the administrators are still working through their investigations but the problems in Wickham's loan book stem from the ailing property market.

    "On a preliminary basis I would say that Wickham lent money to a sector that has been hit hard, being the property and development sector, and there hasn't being recognition of changing values of underlying securities for the loans," he says.

    Sparks says part of the administrator's investigations is to try and understand at what point in time the changes occurred in Wickham's balance sheet.

    He says SMSFs should be wary of investments offering high rates of returns where the underlying assets are suspect.

    "The model here is that they would pay note holders 9% to 10%, and compared to the rest of the market that's a high rate of return, so a high rate of return means greater risk," Sparks says.

    "You need to look at what is the underlying asset for that return; there's nothing wrong with riskier returns but people have to bear that in mind."

    The unlisted debenture sector is being investigated by the Australian Securities and Investment Commission following the collapse of Banksia Securities late last year.

    A profile of Wickham, which employed 50 staff, states the company could provide "fast turnaround times, with the capacity to progress from approval to documentation and settlement within 48 hours".

    Sandhurst Trustees is planning a note holders' meeting on February 5 while a creditors' meeting is scheduled by the administrators for February 6.

    "The creditors have a choice to put the company into liquidation, vote for deed of company arrangement or to hand back the control of the company to the directors," Sparks says.

    He has not received any proposals yet for a deed of company arrangement and says handing back control of Wickham to its directors "is unlikely to happen at this stage".

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,213

    Wonder how SMSF trustees ended up investing in these. Wonder what sort of commissions were paid to advisors.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Terry, probably about the same we got offered to promote Mango Trees or Timber plantations in 2007-2009.

    I know many a local FP who were running year end seminars and raking in 30% com and they thought I was crazy when we told them i was not getting involved.

    You have too ask yourself if you start with 100K invested and the Financial Planner gets 30K commission your investment has to work darn hard just to get your initial capital back.

    Cheers

    Yours in Finance

    Richard Taylor | Australia's leading private lender

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