Tycoon’s Luck With Borrowing Runs Out : Financing: For years, Alan Bond kept creditors at bay while setting up his next deal. With debts of $6 billion, he appears out as head of Bond Holdings.
Financier Alan Bond has been making money on borrowed money since completing his first land deal in 1960 at age 22. It appears that the bill finally has come due.
Thirty years after he took out a loan on five acres of land at Perth in the first step toward building a multinational empire, the businessman and yachtsman has offered to quit as chairman of his flagship Bond Holdings Ltd. to appease the company’s anxious creditors, who are owed $6 billion.
The agreement under which Bond will relinquish control of his vast empire was reached Thursday. Although details must be worked out, the deal could clear the way for refinancing arrangements that could ultimately save many of Bond’s businesses.
It has been a long fall for Bond, known for brash and flamboyant dealings in business and elsewhere. He financed the Australian sailing team’s stunning triumph over the United States in the 1983 America’s Cup race.
Only three years ago, he bought Vincent Van Gogh’s “Irises” from Sotheby’s for what was a then-record $53.9 million, a sale that the auction house helped finance. In March, he sold the painting for an undisclosed amount. Reports were that he took a loss on it.
Bond has never lacked confidence. After immigrating from Britain with his father to Perth, in the state of Western Australia, he quit school at 14 to take a job with a sign-painting company. Because he had done poorly on a spelling test, he had to talk hard to get the owner to take him.
When things didn’t work out, he and his father started a competitor, Nu-Signs, that generated the cash he needed for some of his later deals.
According to a biography released last week by journalist Paul Barry, “The Rise and Fall of Alan Bond,” the financier developed a strategy of keeping creditors at bay while buying and selling land in rapidly developing Perth.
He reportedly was close to bankruptcy in 1962 after stringing along Nu-Signs’ creditors too long but managed to work out an arrangement at the last minute. The next day, he made a large purchase at a land auction.
Barry wrote that with rising land prices, Bond often would agree to buy a plot, promising a small deposit, then have it immediately revalued at a higher price. That way he could borrow more money than had to be paid to the vendor.
With a flair for picking and promoting development sites, he made his first million at 29--in 1969.
He took advantage of eager bankers peddling expensive credit, particularly after Australia’s financial deregulation in 1983, and a stock market full of hungry investors.
At its peak, Bond Holdings included interests in brewing, communications, natural resources and property. He rode out the 1987 stock market crash on the cash-generating strength of his beer businesses.
That actually may have led to his downfall, however, as Bond Holdings picked up steam and eventually ran up debts estimated at $6 billion.
Rising interest rates and bad business decisions alienated Bond’s bankers and creditors, put his Australian brewing interests into receivership and forced him to sell assets ranging from a Hong Kong office development to a coal mine.
There is speculation that the final straw may have come when Bond tangled with London-based financier R. W. (Tiny) Rowland. He bought 20.4% of Rowland’s Lonrho PLC in 1988 in a move that appeared to presage a takeover attempt.
He was forced to sell a year later, saying that he “underestimated the venom” of Rowland, who waged a campaign focusing on Bond’s debt.
Rowland is quoted in Barry’s book as saying that he decided to destroy Bond after the Australian tried to take his yacht’s parking place on the French Riviera.
