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Wizard up for sale after losing magic

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  • Wizard up for sale after losing magic

    Wizard up for sale after losing magic

    Adele Ferguson | May 26, 2008

    STRUGGLING mortgage lender Wizard Home Loans will be put up for sale this week just days after the corporate watchdog rebuked owner GE Money over its debt collection and insurance business practices.

    The Australian understands that GE Money - a subsidiary of New York Stock Exchange-listed giant General Electric - will announce the sale on Wednesday at the NSW state franchisee meeting in Parramatta, Sydney.

    The proposed sale comes as Wizard's founder and current chairman Mark Bouris, and his brother Adrian Bouris, seek to take control of the lender just four years after selling it and the Australian Financial Investments Group to GE Money for an estimated $500 million.

    Mr Bouris is believed to have asked GE to pay him millions of dollars upfront to run the business - plus a stake in the company - so he can sell it at a later date. It is a move that could make him a second fortune.

    The bid by Mr Bouris to take back control of the company echoes Kerry Packer's famous deal with Alan Bond in which he sold the Nine Network to Mr Bond for $1.05 billion and bought it back three years later for $250million.

    GE is believed to be attempting to avoid having to strike a deal with Mr Bouris by finding an alternative buyer this week.

    The sale, coming in the wake of tougher trading conditions sparked by the global credit crisis, is expected to generate a fraction of the money GE paid a group of shareholders, including James Packer and Mr Bouris, in 2004, for Wizard and AFIG. It signals further consolidation in the banking sector, with interested parties expected to include Westpac, which bought RAMS Home Loans last year for $140million, National Australia Bank, Wizard's chairman, Mr Bouris, and possibly Challenger Financial Group, of which Mr Packer has a 20 per cent stake.

    The news follows the announcement by Westpac earlier this month that it will buy St George Bank for $19 billion.

    GE Money's home lending managing director Andrew Moore recently quit to join St George.

    Wizard is one of the biggest non-bank lenders, holding about 2.5 per cent of the total home loan market, which includes banks and non-banks.

    Wizard franchisees have in recent months voiced their dissatisfaction with GE over the management of the organisation and tight credit policies brought on by the US sub-prime crisis that they blame for driving away customers.

    The tighter credit policies imposed as a result of the global credit crisis, combined with high interest rates, have triggered the collapse or sale of some branches. In the four years since GE Money bought Wizard it has lost at least 30 branches, yet its intent had been to expand the network.

    "Life started to get very difficult a year ago when GE started to tighten its credit policies," one former franchisee said.

    "This hurt the amount of business you could write because just about any credit impairment was rejected outright. Before that, credit policy exceptions were a lot more flexible."

    Franchisees also cite Wizard as previously being a price leader with innovative products. Since GE took control, and the sub-prime crisis emerged, they claim Wizard's competitive edge has been dulled, with business being lost to competitors.

    The franchisees believe tighter credit policies ordered from the US have resulted in some good loans not being approved, with lenders then turning to Wizard's competitors.

    This discontent, coupled with lower profits being generated by Wizard, are believed to have prompted GE Money to consider several proposals including a sale, the repositioning of Wizard as a broker or Mr Bouris's proposal to set up a distribution company run by him.

    The NSW state conference is to be followed by meetings in Brisbane on Thursday and Melbourne on Friday, all of which are expected to be fiery with many of the franchisees planning to voice strong opposition to GE. Management at GE is believed to be hoping the sale will help pacify the branches.

    As chairman of Wizard, Mr Bouris is on a package of more than $1million a year and appears as the face of Wizard in its marketing campaigns. He and his friend Mr Packer have a stake in Wizard International, which has 22 branches in four Indian cities. It is understood Mr Bouris began structuring the proposal to take back control of Wizard earlier this year and has been discussing aspects of it with some key franchisees to win support. These discussions are believed to have added to the resentment within the franchise network towards GE.

    Mr Bouris's proposal was to put Wizard under one structure, called One Corp, to be fronted by him. His investment vehicle State Capital Corporation would take a stake in the new entity, along with GE and some of the key Wizard franchisees.

    Wizard, GE and Mr Bouris refused to comment but a spokeswoman said Wizard would make an announcement on Wednesday and Mr Bouris would answer questions sent by The Australian on Thursday or Friday.

    The Wizard network sells about 2.5 per cent of all Australian mortgages through a franchise network of about 200 branches.

    The sale of Wizard comes a week after GE Money was publicly condemned by the Australian Securities and Investments Commission for breaching some enforceable undertakings in its debt collection and insurance business Hallmark. ASIC said GE Money had also "unnecessarily and unreasonably" contacted third parties of borrowers, including neighbours, colleagues and family members.

    The range of GE Money borrowers subjected to the group's "inappropriate" debt collection activities is understood to extend to every division of the credit provider.

    They include Wizard clients, personal loan holders, borrowers with car loans, and people holding GE credit cards, including Myer and Coles cardholders.

    http://www.theaustralian.news.com.au...39-601,00.html
    "There's one way to find out if a man is honest-ask him. If he says 'yes,' you know he is a crook." Groucho Marx

  • #2
    Is the Australian Wizard related to Wizard in NZ?
    DFTBA

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    • #3
      Looks like it: Wizard Home Loans Ltd. (NZ) is wholly-owned by a GE company.

      Comment


      • #4
        Now official

        Wizard Home Loans up for sale
        12:05PM Tuesday May 27, 2008

        Wizard Home Loans, one of New Zealand's largest non-bank home lenders has been put up for sale by its parent, GE Money.

        GE Money says it is "considering strategic options" for Wizard, including a partnership, joint venture or sale. During the process it will keep offering loans and existing services to new and current customers.

        GE Money Australia and NZ Chief Executive Mike Cutter described the sales process to The Australian newspaper.

        "A different ownership structure will allow GE Money to make the best use of capital and focus on higher returning segments that better leverage our core strengths," Cutter told the newspaper. He denied a fire sale was planned and said that GE Money would not sell Wizard for less than it bought it.

        GE Money bought Wizard and Australian Financial Investment Group for A$500 million five years ago. "We think there has been a significant amount of equity built over the four years we've owned the business," Cutter was quoted as saying. "Consequently we would expect to see a return on that investment."

        He said Wizard was a strong consumer brand that was well positioned in a highly competitive market.

        "We believe Wizard's strong brand identity and successful franchise model may be of more value under an alternative ownership structure."

        "Rather than change the Wizard proposition, we will review alternatives that will allow Wizard to continue to provide New Zealand borrowers with competitive products and finance solutions based on its current business model."

        Australia and New Zealand are the only countries in GE Money globally that used a franchise model.

        The Australian newspaper has reported that Wizard founder and chairman
        Mark Bouris has spent the past three months devising a plan with franchisees to take back control of the company he and James Packer sold less than four years ago to GE Money for more than $500 million.

        Bouris was believed to have asked Wizard Home Loan's owner, GE, to pay him millions of dollars and give him a significant stake in the company in return for him taking back the business and running it. The plan was to sell it in an Initial Public Offering (IPO) when the market improves.

        The Australian says it understands that Bouris's plan could be derailed by the GE decision to put Wizard up for sale.

        The Australian says problems at Wizard began last year, around the time of the sub-prime crisis, when the cost of debt increased, mortgage lending started falling, and its US parent issued draconian directives to the branches to tighten up credit policies and reduce risk.

        In an item posted on its website last year, Wizard said that that being part of GE Money meant it was well placed and not affected by the same tough conditions facing other finance companies.

        Because it was part of GE, funds did not need to be raised from the public.

        Wizard began in NZ in 1999, when it opened its first branch in New Lynn, Auckland. It says it is New Zealand's "leading non-bank lender" with more than 40 branches across the country.

        Former All Black Grant Fox has been the public face of the company, appearing in its advertising and promotional material.

        It is predominantly a residential mortgage lender with a range of financial products, including loans for first home buyers, construction, refinancing and commercial projects. It also offers insurance. Wizard says it does not lend money for "sub-prime" or other high-risk lending.


        - NZ HERALD, INTEREST.CO.NZ

        http://www.nzherald.co.nz/section/3/...ectid=10512742
        "There's one way to find out if a man is honest-ask him. If he says 'yes,' you know he is a crook." Groucho Marx

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        • #5
          I like the last paragraph: Wizard might not have lent money for sub-prime or high-risk lending, but GE certainly has, given its association with Blue Chip.

          Comment


          • #6
            GE have made it almost impossible for Wizard.

            AMS (GE) are their sole funder and have tightened up considerably. Before the market turned they had made it very hard to do busy as they had introduced virtually no new product initiatives for a couple of years.

            In recent times they have removed their "no doc" product off the market and their construction loan leaving them uncompetitive.

            GE then released a non-conforming product which is a complete dog which no one can use

            It may want to update its information stating that it has 40 branches as well as from memory this was down to 30 with recent branch closures with more up for sale.

            The best thing they could do here would be to turn it iinto a normal mortgage broking outfit before the brand presence is completely destroyed
            For property financial solutions
            CALL 021300192 or [email protected]
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            • #7
              I had wrongly assumed that Wizard were, in fact, brokers. It comes as to surprise to me to learn that are real lenders, of GE's money.

              It is a difficult time to convert to broking, but a lot of money has been spent on marketing the Wizard brand which, to the general ignorant public like me, is a brand associated with broking.

              Maybe Adam Parore might be interested? Cut it down to 10 outlets nationwide, and start an urban legend that Parore was known as "The Wizard" during his test career.

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