Australian Guarantee Corporation

Infobox_Company
company_name = Australian Guarantee Corporation
company_
company_type = No longer trading
company_slogan = It's Australian for Finance
foundation = 1925
location = flagicon|AUS Sydney, Australia
industry = Finance
products = Personal Finance
Business Finance
Retail Finance
Motor Vehicle Finance
Investments
Line of Credit|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.

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 purchase. Most of the funding for AGC's loans came from issuing debentures 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 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.

Types of Products Offered

Personal Finance

AGC CreditLine

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.

Personal Line of Credit

Provided a line of credit up to $15,000. Enabled customers to obtain home improvements, motor vehicles, debt consolidation 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.

Mortgage Line of Credit

Provided a line of credit secured by a mortgage, over residential real estate for amounts over $20,000. Maximum amount that could be lent to a customer could be up to 90% of their property's value. This type of credit facility is secured by a first or second mortgage.

GE Acquisition

On Monday, 26 November 2001, it was announced that GE Capital (GE Money) had made an unsolicited approach to the Westpac Banking Corporation regarding the possible sale of parts of AGC's business in Australia and New Zealand. [See http://web.archive.org/web/20020408182337/www.agc.com.au/display.cfm?doc=00-80-15] This was completed in June 2002 and from that point GE started integrating the AGC business into the GE Consumer Finance Australian arm.

Notes and references

* "Westpac: The Bank that Broke the Bank", Edna Carew, Doubleday, 1997, paperback ISBN 0-86824-664-6.