Refund sale on the rocks

Earlier this month, it was revealed that the Refund sale to State Home Loans had fallen through, putting the brokerage back on the market.

Since that time, Independent Mortgage Professionals have been named as another potential buyer, with contracts sent out to the company on 5 March.

However, with no word as yet on the sale, the odds do not seem good.

A respected industry source that is well versed with SV partners’ handling of the Refund administration told The Adviser that the complex nature of the business and the unusual remuneration structure had made the business a difficult one to sell.

“It’s very likely a contractual matter concerning the structure of the sub aggregation agreement or the very nature of the lender agreements themselves [has caused the delays],” the source told The Adviser.

“Operating a branded aggregator such as Refund would not be an activity suited to the inexperienced or those lacking financial resources.”

However, the source said the business model itself was sound, which should help the eventual sale of the business.

“The franchised broker operating under a strong brand is a proven model- Mortgage Choice and Aussie is ample evidence of this.  Whether this method of operation, combined with the model of commission rebates to consumers remains viable in the current climate is for conjecture.  Once again it’ll depend on the nature of the contracts.  Refund no doubt has many loyal and efficient franchisees eager to continue in the business with a good geographic footprint, so there should be scope to sell the business.”

Australian Mortgage Brokers chief executive Paul Gollan agrees and says the business model still has plenty of appeal.

“Refunding, as marketing, is an excellent idea. But the rebates were possibly too generous. But I don’t think the concept of redistributing some of the income generated from broking is a bad idea if the franchisees have an input and choose how much to refund,” he said.

“All this proves is what happens when a company isn’t run properly.”

While the sale of Refund is obviously complex and therefore time consuming, franchisees are becomingly increasingly frustrated with the handling of the process by the administrator, SV Partners.

Since their appointment SV Partners have made several assurances to both franchisees and the media that a sale would eventually occur.

However, in the five months since Refund went into administration, a sale is still yet to occur.

Similarly, commissions are still yet to be paid, leaving many brokers angry and disillusioned.

A Refund franchisee that wished to remain anonymous told The Adviser that communication from the administrator had been “pitiful”.

 “There’s more than 250 franchises, there aren’t many companies would want to buy that many franchisees. They’ll have to deal with territory disputes with their own franchises. It’s a big buy,” the franchisee said.

“And after all these accusations of insolvent trading, who would want to touch it?”

The Adviser has made several attempts to contact the administrator to find out additional information on the progress of the sale, however, the call for more information has gone unanswered.