As I noted last week Bank of Queensland is showing signs of stress in its loan book, on top of that RPData has recently released data that there is growing stress on real estate agents due to sharp falls in housing transactions. Put these two together and it probably shouldn’t be too much of a surprise to see a small Queensland based mortgage broker falling over:
In 2009 Wayne Ormond was voted Queensland’s richest bachelor, worth an estimated $25 million. Today the one-time BRW Rich Lister is battling to save his mortgage broking company, Refund Home Loans.
Directors placed the company in the hands of voluntary administrators, Brisbane-based SV Partners, to try to sort out its financial mess. It is believed it owes the banks about $2.5 million.
Ormond, 38, from Innisfail quickly amassed a fortune through Refund, a company with 350 franchise owners.
He has been a regular on television for his “advertorials’ on Today Tonight, The Morning Show with Kerri-Anne, and A Current Affair. Ormond yesterday said the company already had four potential buyers for the group, including a possible bid for Refund from the franchisees.
“It is a very sad day for me,” he said.
“I started this company eight years ago and built it up and invested every cent I own in it . There has been a lot of blood, sweat and tears go into this and this is very sad.”
He was hopeful however that a deal could be worked out to “take the company forward and look after the franchisees”.
Ormond, who estimated Refund was worth anywhere between $30 million and $50 million, blamed the global financial crisis and the fact that banks were curbing back their lending, particularly to small business owners.
According to reports from the administrators to Refund Home Loan franchisees, increasing pressure from creditors forced the company to call in administrators to seek a quick sale.
Just like housing itself, it was very easy to make money while credit was expanding rapidly, all sort of businesses that would otherwise be unviable were able to survive because the economy was awash with money. Once the growth in credit slows and associated asset values begin to fall then so do companies that had business models built on that ever expanding credit growth. The latest data on insolvencies suggests this is just the beginning and it is in-line with predictions from market analysts made last month:
After one of the ugliest retail downturns in two decades, corporate doctors are warning that more retailers will hit the wall in the next 12 months.
“This is the hardest retail environment I’ve seen in 20 years,” Ferrier Hodgson partner and retail specialist James Stewart said. Mr Stewart expects more insolvencies among retailers in the next 12 months.
“Smaller chains and fashion shops run by mums and pops are the most vulnerable,” he said.
“I would not be surprised if there would be more retailers calling in voluntary administrators or receivers over the next few months.”
PwC retail partner Stuart Harker also expects more retailers to go into voluntary administration or receivership in the next year.
“The smaller chains will be vulnerable and stores in the middle market, which have not done anything to adapt to the changing retail downturn, will continue to struggle and may not survive,” Mr Harker said.
If you needed any more evidence that the Wayne Ormond didn’t quite understand what the underlying driver for his businesses was then you only have to look at his latest announcement from July this year:
Refund Home Loans has decided to enter the real estate market, with the opening of its first real estate office in South Brisbane due shortly. Executive chairman of the Refund Group, Wayne Ormond, has voiced the groups intention to open a network of real estate offices across all states over the next few years.
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Mr Ormond said his growth plans for the new initiative are quite optimistic with almost 50 stores expected to open over the next 12 months.