$660million financial collapse

In what's possibly further indication of what's happening in the real world of the Australian economy, as opposed to the continual capitalist bullshit we get from Canberra about how wonderful it all is here (you know, all those cliches about "envy of the world", bla.... try paying our rents and see how envious the world is then, but I digress) we have today the news of the large financial group Banksia going broke in Victoria.

Unfortunately it's not a bank, so there's none of this stuff for investors:

I dunno why anyone would invest in anything that wasn't guaranteed by the gov these days. I mean FFS Europe lurches from one catastrophe to the next, the US is obsessed with some strange delusion that this election is actually going to do something to fix things, Japans been in the doldrums since longer than the GFC, and even the Chinese economy isn't looking too shit hot these days. Yeah, so lets chuck all our money into some company that's not gov guaranteed, this is Australia right? We're the envy of the world right? Nobody goes broke here right? We're the boom town...

Well, there are now a a whole lot of people in the state of Victoria wondering what's going to happen with the $660 million that's invested with this company.

THOUSANDS of farmers and other regional Victorians face a nervous wait after the collapse last night of the financing group Banksia Securities, which has put at risk $660 million in savings.

Receivers McGrathNicol took charge of Banksia. It is based in Kyabram in the state's west and generates the bulk of its business through that region.

As a non-bank lender, Banksia offers investors high interest on debentures and then lends these funds out as mortgages or commercial property loans.

Given Banksia does not hold a banking licence, the funds in the debentures are not backed by a deposit guarantee.

Debenture firms often target retirees as investors, generating new business through promises of high-interest returns backed by property.

McGrathNicol last night froze the $660 million in investments and stopped all interest payments as it began an urgent review of the company's accounts. Read more

And why has said company gone broke? Bad management? Dunno, hard to say at this stage. It appears they've suddenly had a big increase in bad debts from it's clients, looked at the books, and went "Oh shit, we're fucked". 

McGrathNicol's appointment was triggered by Banksia launching a review of its lending book. 

Early figures from the review presented to the board yesterday indicated a sharp jump in provisions needed to cover bad loans. 

The steep losses were likely to lead to Banksia having ''negative net equity'', it told debenture holders ahead of the appointment of McGrathNicol. 

At the end of June, loans valued at $65 million made by Banksia were overdue, according to the company's financial accounts. In addition, it had seized property against which it had lent $74.5 million. Read more

Dunno what the "high" interest rates were, but I guess it's the old saying, if it sounds to good to be true then it probably is. Aside from people who simply got sucked in though, this could be an indication of the reality in parts of Australia; that there is a lot of debt that people are finding they can't pay off.  This despite the rosy picture Canberra likes to paint.

(*also posted here)