Self-funded retirees facing $30 million loss following collapse of lender Wickham Securities

Self-funded retirees lured by the promise of high returns have again been caught out following the collapse of Brisbane-based specialist lender Wickham Securities. The lender provided property loans.

It’s an all too familiar story –following a similar plot line that led to the demise of Victorian rural lender Banksia and Sydney-based sub-prime lender Provident Capital last year.

Wickham Securities raised money from SMSF investors through $1 unsecured deposit notes promising returns of 9.25%.

The money was then lent the money to what appears to be borrowers of last resort to fund commercial property acquisitions or refinance existing loans, at interest rates in excess of 20%.

A spokesperson for ASIC told Property Observer, that the collapse of Wickham Securities would be included in its internal taskforce investigation into the debenture sector.

“ASIC will be investigating and understanding the circumstances surrounding its failure. ASIC will work with the administrators to maximise the best possible return for debenture holders,” said the spokesperson.

The collapse of Wickham came just a day before Bill Shorten, the minister for financial services and superannuation announced on December 22, that there would be public consultation about possible changes to strengthen the regulation of finance companies that issue debentures to retail investors.

Grant Sparks and David Leigh of corporate recovery firm PPB Advisory in Brisbane were appointed as administrators of Wickham Securities by its board of directors on December 21.

The consultation will likely come too late for Wickham’s unsecured noteholders who received no warning from the directors of the company that it may be facing any financial problems.

While the most recent September quarterly report to trustees of noteholders does not indicate that any loans financed from deposit notes were in arrears, initial investigations by administrators PPB Advisory indicate that some loans have gone bad.

Wickham attracted around 300 investors who invested in $1 deposit notes.

They are being represented by Sandhurst Trustees Limited, who will vote on their behalf alongside secured creditors on the future of Wickham at a creditors meeting to be held on February 6.

Prior to the meeting Sandhurst is seeking direction from noteholders as to how it should vote.

A December 24 update from PPB Advisory, disclosing possible conflicts of interest, suggest recent problems were flagged at the start of December, with the firm asked by Sandhurst to undertaken an independent review of certain aspects of the Wickham loan portfolio.

The review was not completed and PPB Advisory have not been paid Wickham.

However, problems for Wickham appear to date back much further.

In 2009, Wickham Securities along with Bankwest, as secured creditors, appointed Ferrier Hodgson as receiver-managers of Plantation Rise residential development at Woombye on the Sunshine Coast hinterland.

The appointment came just days after Brisbane-based McLeod and Partners was appointed voluntary administrator with Wickham reported owed several millions of dollars.

It’s most recent September quarterly report to trustees stated that it should have enough property "to repay the amount of each debenture when it becomes due and payable" but also warned that they had invested in unsecured deposit notes not bank deposits and risked "losing some or all" of their investment.

Wickham had loaned out $27 million out of but none of the 20 loans were in arrears, and they were secured by $145 million worth of property, the accounts said.

The report stated that Wickham should have enough property "to repay the amount of each debenture when it becomes due and payable".

Annual accounts to the end of June show that Wickham reported a profit of $396,000 following a loss of $839,000 in the previous year and report no significant change to the nature of the company’s activities.

The company earned $5.17 million in interest payments

The directors are listed as Bradley Sherwin (chairman), Peter Siemons, Ian Montgomery and Garth Robertson.

Sherwin, also the company secretary, received a salary of $117,500 and is the only shareholder with 644,556 shares.

The annual report shows that Sherwin’s financial planning business, Sherwin Financial Planners provided consultancy services to Wickham, which along with administration costs totalled $222,954. In the previous financial year, the financial planning business was paid $767,812.

It says the Bradley Sherwin specialised in providing financial advice to high-net worth individuals, private businesses and self-funded retirees.