Honister Capital was formed a month ago after Money Portal was placed in administration on June 21 with debts of over £52m. TMP subsidiaries Sage, Burns Anderson and Willis Owen continue to trade under the Honister Capital umbrella but its national arm Bates was also placed in administration, with advisers transferring to new entity Honister Partners.
Of the 1,400 TMP advisers, 1,395 were bulk-transferred to Honister Capital. The remaining five were under review by TMP and two have since transferred.
Strategy and business development director Alan Easter says the decision to place Bates in administration had nothing to do with dumping any potential misselling liabilities.
He says Bates was a profitable business but was being supported by historic inter-company loans from TMP which were called in when TMP went into administration and forced Bates in the same direction.
Easter says: “When Money Portal acquired Millfield and InterAlliance, it took on its property portfolio. Bates was a tiny business with about 40 registered individuals that suddenly had 500, so its regulatory capital situation was amplified by a multiple of thousands. Money Portal injected capital into the business to deal with property leases and regulatory capital.”
Both Honister Capital chief executive Mark Lund and Easter insist the formation of Honister Partners was not intended as a way to dump liabilities.
Lund says that the vast majority of Bates advisers only have a three-year trading history with the firm as they were acquired from Millfield when Millfield went into administration and their liabilities stayed with the administrators. Any potential advice liabilities arising in Burns Anderson, Sage or Willis Owen are the responsibility of Honister Capital.
Lund says the “very few” live complaints will be resolved by TMP and the administrator. Any complaints that arise before Bates goes into liquidation will be settled by the administrator. Complaints filed after that time will fall on the Financial Services Compensation Scheme.
Easter stresses that TMP was not subject to any special reviews by the FSA and was only subject to the two recent industrywide thematic reviews over pension switching and bond sales due to the capital gains tax changes.
He says: “I have not seen anything that’s been reported to our regulatory team or to us as the executive management from our compliance function that would suggest that we were any different to any other business in the market.”
The aggressive growth strategy employed by TMP, its last transaction being the £14.2m acquisition of Burns Anderson in March 2008, led it to take on big debts. As well as a £27m loan from Bank of Scotland, it raised £25m from a preference share issue, in effect, a three-year £25m bond with a quarterly coupon, mostly held by hedge fund managers.
TMP serviced its bank debt without missing payments and the business maintained FSA capital requirements but BoS was becoming increasingly concerned about the timetable of repayment. On May 7, BoS decided against a restructure and Ernst and Young was appointed to carry out an accelerated sale.
Lund says: “The board’s responsibility was to maximise the return for BoS. We worked exclusively with Monsoon founder Peter Simon and on June 1, Peter made an offer for Willis Owen, Sage, Burns Anderson and assets and liabilities of TMP and Bates. By assets and liabilities of Bates, I am talking about cash creditors and commission debtors, clawback commission creditors, clawback commission debtors and all unallocated commission.”
Lund says Simon was “a very significant investor in Money Portal”. He says the new management structure is very different to TMP, which had a board of 10.
Honister Capital has three non-executive directors – Mark Tennant, Mark Holloway and Anton Simon. Bryan Levine and Lund are the two executive directors and Richard Pearson is company secretary. Lund, who became TMP chief executive in Sept- ember 2008, says the only other TMP board member on the new board is ex-chairman Tennant.
Simon is the major shareholder in Honister Capital while the management team have equity that can grow over time depending on performance.
Lund says Honister Capital will publish its annual reports “in a more timely manner” and also publish a half-yearly statement. He says TMP’s acquisition strategy led to its downfall and Honister Capital will concentrate on organic growth and be debt-free.
Easter says Honister Capital supports the RDR and is working towards adapting adviser-charging but has yet to calculate the costs or take this into account in the firm’s future plans.
He says: “We realise this is not the perfect solution. The perfect solution would be if Lehmans was still trading, Woolworths was still trading, we had good economic conditions, the bank debt was serviced, the shareholders were happy and the business carried on being the profitable enterprise that we all believed it could be.
“But we had to deal with the relationship with the bank and the shareholders, plus a downturn in the climate and regulatory drivers which mean that your margin per transaction is going down but your cost per transaction is going up.”