Australian Guarantee Corporation
Encyclopedia
Founded in 1925, AGC was Australia's oldest national finance company. AGC offered a range of finance, investment and insurance products and were market leaders in equipment finance, cashflow finance, motor vehicle and personal finance.
. Most of the funding for AGC's loans came from issuing debenture
s to the public, offering attractive interest rates.
In 1957 the Bank of New South Wales (later called the Wales, the forerunner of today's Westpac) bought 40% of AGC and over the years progressively increased its interest to a majority stake. Banking regulations at the time prevented banks from doing the sort of lending finance companies like AGC did, but buying a finance company let the banks get around that. All the major Australian banks ended up with finance company subidiaries doing riskier lending than the banks themselves would. The Wales let AGC run as an independent business, and that included giving no guarantees on the debentures issued by AGC.
In general lending though those years was conservative and risk was tightly controlled. Lending against real estate in particular was capped at 30% of the loan book and spread by type and geography. The head office in Sydney at the time was devoid of luxuries, in a way reflecting in its environment the discipline applied to the business.
One property position that did spiral away in that time though was the Kooralbyn resort development started by prominent businessmen Peter Abeles
and Arthur George
in 1975. They put up $2m and AGC put up $4m, but costs increased and after advancing $12m AGC took it over. AGC then spent yet more over subsequent years until finally exiting in 1987 for a loss of some $50m. The motto within AGC that "the first loss is the best loss" had been illustrated, but the experience didn't keep it out of much worse property forays like the Como development in later years.
A retail finance card, which allowed the cardholder to make a purchase with extended interest free and deferred payment options, allowing them to get what they want today, and pay it off before the promotion ends and not pay a cent in interest. The downside to this product for the consumer, is if they failed to repay the balance of a particular interest free plan, it would revert to a high interest rate. These cards could also be used through EFTPOS and ATM terminals, but these would automatically bear high interest. The card has since been superseded by GE CreditLine.
or use the line of credit for any other worthwhile purpose. Cash advances were also available under this product allowing a borrower to take their line of credit up to their limit.
Origins
AGC was founded in 1925 and listed on the stock exchange in 1928. Its business began with lending for cars and farm machinery and later expanded into personal loans, loans for non-farm business equipment (the type structured as leases), and hire purchaseHire purchase
Hire purchase is the legal term for a contract, in this persons usually agree to pay for goods in parts or a percentage at a time. It was developed in the United Kingdom and can now be found in China, Japan, Malaysia, India, South Africa, Australia, Jamaica and New Zealand. It is also called...
. Most of the funding for AGC's loans came from issuing debenture
Debenture
A debenture is a document that either creates a debt or acknowledges it. In corporate finance, the term is used for a medium- to long-term debt instrument used by large companies to borrow money. In some countries the term is used interchangeably with bond, loan stock or note...
s to the public, offering attractive interest rates.
In 1957 the Bank of New South Wales (later called the Wales, the forerunner of today's Westpac) bought 40% of AGC and over the years progressively increased its interest to a majority stake. Banking regulations at the time prevented banks from doing the sort of lending finance companies like AGC did, but buying a finance company let the banks get around that. All the major Australian banks ended up with finance company subidiaries doing riskier lending than the banks themselves would. The Wales let AGC run as an independent business, and that included giving no guarantees on the debentures issued by AGC.
1970s
Through the 1970s AGC expanded and increased profits. It avoided many of the disasters that befell others in that time, though it did indulge in the diversification strategies that were in vogue, ending up for a time with a majority interest in Budget Rent-A-Car and in property developer Mirvac, plus minority interests in all sorts of things from winemaking to caravans. On the finance related side though AGC expanded overseas, and in Australia acquired Bill Acceptance Corporation (BAC) in 1977 (which it ran as an independent business).In general lending though those years was conservative and risk was tightly controlled. Lending against real estate in particular was capped at 30% of the loan book and spread by type and geography. The head office in Sydney at the time was devoid of luxuries, in a way reflecting in its environment the discipline applied to the business.
One property position that did spiral away in that time though was the Kooralbyn resort development started by prominent businessmen Peter Abeles
Peter Abeles
Sir Peter Emil Herbert Abeles, AC was an Australian transportation magnate. A refugee from Hungary, he became one of the most powerful businessmen in Australia, and was knighted in 1972.-Life:...
and Arthur George
Arthur George
Sir Arthur Thomas George AO is an Australian lawyer and association football administrator.-Early life:George was born in Sydney, Australia to parents of Greek ancestry and was schooled at Kensington Public School...
in 1975. They put up $2m and AGC put up $4m, but costs increased and after advancing $12m AGC took it over. AGC then spent yet more over subsequent years until finally exiting in 1987 for a loss of some $50m. The motto within AGC that "the first loss is the best loss" had been illustrated, but the experience didn't keep it out of much worse property forays like the Como development in later years.
AGC CreditLine
Personal Line of Credit
Provided a line of credit up to $15,000. Enabled customers to obtain home improvements, motor vehicles, debt consolidationDebt consolidation
Debt consolidation entails taking out one loan to pay off many others. This is often done to secure a lower interest rate, secure a fixed interest rate or for the convenience of servicing only one loan....
or use the line of credit for any other worthwhile purpose. Cash advances were also available under this product allowing a borrower to take their line of credit up to their limit.