Don’t overdo debt burden

THE scarcity of credit is clearly top of mind for Western Australia's business elite, with strong concern about the role of the banking system during this ongoing financial crisis.

While not everyone was down on the banks, there was a level of disquiet about the tightening up of debt markets among the elder statesmen and women of WA's entrepreneurial class, especially as Australian banks have proved so resilient, partly due to government regulation and partly due to the timely deposit guarantee.

A group of seven business leaders spoke to WA Business News as part of a forum arranged as part of the judging process for Ernst & Young's WA Master Entrepreneur of the Year to be awarded later this year.

The seven were: Coogee Chemicals executive chairman Gordon Martin; former Clough chairman Harold Clough; former Wesfi and current Wesbeam chairman Denis Cullity; former MG Kailis Group governing director Patricia Kailis; property and car magnate Stan Perron; former media and wine magnate Jack Bendat; and Gull Petroleum director Fred Rae.

"The banks are so cautious and are trying to cut back on commitments long term," Mr Martin said.

"International banks are getting out of Australia.

"We had a nasty experience with a syndicate of seven banks.

"GE, Bank of Scotland and others, they were chronic, they just wanted to get out of Australia."

The financing arrangements Mr Martin referred to were in relation to Coogee Resources, a spin-off from his business empire, which he eventually sold late last year after earlier plans, including a stock market float, were foiled.

Mr Cullity was more relaxed about the role of the banks, suggesting that borrowers also played their part in the problems that have occurred.

"I think we can exaggerate it, I don't blame the banks," he said.

"It was a lending binge and we all took on too many debts. It was crazy and it had to stop.

"Lenders have learned their lesson, the borrowers have to learn too.

"Control your costs and you can always make a quid."

While Mr Perron believes the banks have played the biggest role in the global problem, he agreed that borrowers had to take some of the blame.

"It's only those companies that have over-borrowed that are in trouble," he said.

"If you borrowed as much as the banks wanted to lend, you are in trouble."

The frustration with banking was partly reflective of the cycles these master entrepreneurs have been through, some acknowledging that even if they don't have any issue with their bank today, they have had bad experiences before.

Mrs Kailis recalls a previous downturn when their bank made life difficult because the business owned factories rather than CBD buildings.

She also bemoans the turnover of banking executives.

"Every time there is a change we have re-educate our bankers," Mrs Kailis said.

Mr Clough concurred. "I think it is a deliberate policy not to allow bankers to get too close to the customer," he said.

But, again, not everyone took umbrage at banking tactics. In a slightly different way Mr Bendat reiterated the point others made about those who courted trouble by borrowing heavily.

"I find my relationship with the bank very, very good because I borrow very little from them," he said.