Gaining from sale or 'cattle at the slaughter floor'?

by Adam Smith06 Dec 2011

Brokers associated with Refund Home Loans are split on whether the sale of the business will be successful, or franchisees are simply being treated as "cattle at the slaughter floor".

A former Refund franchisee, who wished to remain anonymous, said brokers who are patient with the administration process will see benefits from the sale.

“I expect that they will be taken over by someone who will manage the business more efficiently, because they'll be run purely as brokers. They'll have more focus on them as brokers, and they'll have a better outcome. I see them gaining, not losing,” he said.

The broker predicted that the business could be bought by another large mortgage broking franchise and defended Refund’s business model, saying the company was sent into administration because lenders wanted an interest in the business if they were to recapitalise its debt.

“The reality of it is not so much that Refund had issues finding a lender to recapitalise; it's that banks wanted to have ownership. In these times for any lender to go out and renegotiate with a business, they would want some interest in it. It happens. It wasn't a reflection on the business model,” the broker said.

However, a current Refund broker also speaking on the condition of anonymity has claimed the administration process has amounted to “bullying bordering on unconscionable conduct”.

As exclusively obtained by Australian BrokerNews yesterday, Refund’s administrator, SV Partners, sent a letter to franchisees reassuring them that a sale of the business was being negotiated, with the field of buyers narrowed to three. The administrator told franchisees a sale contract would likely include conditions that outstanding trail and upfront commissions owed to franchisees be paid on settlement.

The administrator warned, though, that this is likely to be conditional on franchisees waiving their right to issue breach or termination notices to the company, or withdrawing them where they have already been issued. SV Partners told franchisees that termination of franchise agreements could "jeopardise commissions owing”.

The current Refund broker said precluded a “fair and reasonable exit” by franchisees wishing to leave the company.

“I think the letter speaks for itself, that SV Partners wish to bully franchisees into being an asset for sale, cattle at the slaughter floor, and tell us we have no right to walk away while they serve the interest of creditors,” he said.


  • by Bob 6/12/2011 10:16:35 AM

    The main reason for Refund being where it is, was Wayne spending thousands of dollars on new franchise models and failing. Refund Financial Planning, Refund Real estate cost the company so much money in ads and set-up and the home loan business paid for it all. Greed and mismanagement not the business model put them into administrators hands..

  • by Pete 7/12/2011 4:44:38 PM

    The administrators are only doing what is right by everyone and in good order. Indeed the Franchisees have themselves claimed during the administration process for marketing,advertising and other items of cost as unsecured creditors, and it is true that Refund franchisees make up a part of the Refund business' entity. All Franchisees stand to benefit from a sale, as this will place them in a stronger market position without loosing out on any trail benefits. The administrator is doing the right thing for them by forging a more competitive outcome in order for all to benefit. So in this instance, the administrator is showing regard for conscience and is following the right process and being totally reasonable. All should be focused in their interest to be good brokers, and hopefully this will happen sooner.

    An analogy of the administration: if it was a car dealership in administration, then the same process would apply as the administrator would be seeking the best outcome for all involved that would include a sale of the franchisees stake, the vehicles, the caryard and service centre with buildings, and good will of the customers. The same concept applies, only different assets for sale.

    Look at the time it took Ansett administrators KordaMentha to complete the resolution for Ansett employees, a good 10 years.