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

Self-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 turn-around 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”.