This was published 8 months ago
Simon handled millions for some of Australia’s richest. Then things started to go wrong
By Anne Hyland
In March 2021, Simon Raftery bought a $7.6 million waterfront Sydney home. Raftery, who ran his own funds management and advisory business, Remagen Capital, appeared to be doing exceptionally well. He had the flash house, with its Balinese-inspired design, tropical gardens, pool and private jetty. He drove a Range Rover, was married with kids, and his business boasted an impressive global client list.
Among those clients were BlackRock, the world’s biggest asset manager, which has $10 trillion in funds, and a slew of ultra-high-net worth families from Australia and Asia. The latter included the family of Tony Berg, a former Macquarie Group and Boral chief executive, and also Irene Lee, a successful investment banker, barrister and company director. Lee has served on many high-profile boards such as QBE, Cathay Pacific and HSBC, and is currently an Alibaba director. She also hails from one of Hong Kong’s wealthiest families, who founded the property group Hysan.
Raftery’s ascent to managing the money of such formidable and sophisticated business people and institutions was impressive, given his relatively unremarkable career. He had worked for a family office, which he declines to name, then spent almost five years as an insolvency practitioner, before setting up Remagen Capital, a private credit fund, in 2013.
Remagen Capital founder and managing director Simon Raftery.
Remagen, seemingly overnight, was a success. It delivered returns to clients that are understood to have exceeded 15 per cent on average annually. But then Raftery and Remagen’s fortunes turned.
Last year, two national food companies, of which Raftery was a director, and to which Remagen entities had lent money and become an investor, collapsed owing about $80 million.
Both companies, according to liquidators’ reports, had traded while potentially insolvent, and both left behind a trail of angry wealthy clients, small business owners, and farmers, who were chasing Raftery and Remagen demanding answers as to what went wrong, and where was their money?
Binh Minh, who migrated to Australia more than three decades ago from Vietnam, was one of them. He had built a successful business as a mango farmer in Far North Queensland. He was owed $605,919 by one of the companies, Aussie Frozen Fruit (AFF), of which Raftery had been a director. Raftery had sent a text and an email to Binh promising he would be paid. The money never came. “We got nothing. I still had to pay salaries to workers, and cover the costs of fertiliser, irrigation, fuel and everything else,” he says. “I really struggled last year. ”
Text exchange between mango farmer Binh Minh and Remagen’s Simon Raftery, who was a director of Aussie Frozen Fruit. Raftery was confirming Binh would be paid. He wasn’t.
The two failed companies, where Raftery was a director, Aussie Frozen Fruit and the In2Food group, had big customers from Woolworths and Coles to cruise ships. Their collapse would draw the attention of federal politicians, regulators and government departments.
In Canberra late last year, a meeting was held in Parliament House between politicians and Warren Day, the Australian Securities and Investments Commission chief executive, to discuss the regulator’s performance, the collapse of AFF, and its director Simon Raftery.
Raftery was being noticed but not for the reasons he would have wanted.
The cautionary tale of what went wrong for Raftery and Remagen Capital, is two-fold. It’s the oft-told story of a young man who got out of his depth. Raftery is learning this in the most personal way as his waterfront home will be auctioned this weekend.
It’s also about the risks that exist in the growing, opaque asset class of private credit funds. Investors, particularly wealthy families, have been drawn to this asset class, and when it goes well, the returns can be sky-high. When it doesn’t, the fallout spreads well beyond Raftery’s home, and wealthy families.
Simon Raftery grew up in a middle-to-upper class family and attended the private all-boys Sydney school, Newington. He later forged a career in finance, working for a family office, and then at BRI Ferrier for almost five years, learning the ins and outs of restructuring financially distressed companies. In 2013, he set up Remagen Capital, which took its name from a critical World War II battle.
Before Raftery launched Remagen he discussed the idea for his business with Mark Phillips, a former long-serving Commonwealth Bank executive and a former managing director of public company Record Investments. The men had met when Raftery worked at BRI Ferrier, and had stayed in touch. Raftery asked Phillips to join as Remagen’s chairman.
Mark Phillips, a former long-serving Commonwealth Bank executive, became Remagen’s chairman. He left in 2017 after four years at the firm.Credit: LinkedIn
Remagen’s focus was to take a slice of the profitable private credit market. It would provide advice and loans to small and medium size companies experiencing some form of financial stress. Remagen would raise money for those loans from institutional and wealthy clients, on a deal-by-deal basis.
When Remagen extended a loan, it typically took security over the financially stressed company’s property or plant and equipment. If the borrower defaulted, then an office building, factory or machinery could be sold, and Remagen’s clients would get some or all of the money they had lent back.
Private credit funds have boomed as an asset class since becoming popular before the Global Financial Crisis, with some of those entities contributing to the spread of the crisis worldwide. They continue to be embraced for shifting riskier company loans away from systemically important banks and into specialist firms, such as Remagen.
In Australia, the value of loans made by such private groups, which exist outside the banking system, has grown $183 billion in 2008 to $244 billion this year, according to the Reserve Bank of Australia. The checks and balances on such firms and sector are less than those applied to more heavily regulated banks or superannuation funds.
Remagen delivered bountiful returns to clients that averaged more than 15 per cent a year, according to several people familiar with the firm’s performance, who declined to speak publicly. They were stellar returns given the prevailing low-interest rate environment at the time. However, such high returns also reflected the risk involved in Remagen’s deals.
Remagen’s client base grew. Business was better than Raftery could have imagined. BlackRock even considered setting up a fund with Remagen, although the plan never went ahead. BlackRock declined to comment.
Raftery also looked after his own money and invested in deals, and also money from his extended family, including his father Martin, who had worked as a sports physician for the rugby league club St George Illawarra and later for Australian Rugby Union.
In 2017, Mark Phillips departed Remagen. His role had been to review and offer counsel on the firm’s deals. A man of strong faith, the then 57-year-old had been asked to become chief executive of Sydney’s CatholicCare.
After Phillips’ exit, Remagen’s strategy and operations changed. Phillips declined to be interviewed.
Remagen, which had focused on providing short-term loans, began to expand into more private equity style transactions, and take ownership or stakes in small to medium size companies.
The change was viewed by some observers as moving Remagen and its related entities up the risk curve. Turning around businesses and exiting those investments could take years, tying up capital and delaying returns. As Remagen expanded into riskier sectors such as mining, the size of the transactions grew.
“Simon was going outside of his skill set,” said one observer, who had knowledge of Remagen activities, but requested anonymity.
Raftery’s firm Remagen would be involved with mining-related groups such as Australian Abrasive Minerals, Highwall Mining and Bridge Mining, Indus Mining, and Adaman Resources. Australian Abrasive Minerals, Highwall and Bridge Mining are in administration. Remagen claims it’s owed $11.7 million from Highwall and Bridge.
In Adaman Resources, Raftery was involved with former Asciano boss Mark Rowsthorn in a failed and controversial deal that ended up in court. Rowsthorn and Raftery had used a slice of debt to try to liquidate a West Australian mine, which hoped to produce 400,000 ounces of gold in seven years.
Raftery has also been involved as an adviser to a shareholder in the New Wilkie Energy group of companies, which were placed into administration at the end of last year. Raftery made the initial phone call to discuss putting the group into administration.
The New Wilkie Energy group had a coal mine in south-western Queensland and exploration permits for Corvus Coal, a project in central Queensland. Corvus Coal Pty Ltd was one of the companies in administration. Last month, Raftery resigned as a director of another company, Corvus Coal Holdings.
Also, last month, another mining company, Habrok (Rydges), of which Raftery remains a director according to corporate records, had a liquidator appointed.
While Raftery’s appetite to take Remagen into deals in the mining sector grew, his group was also involved in deals in other areas. Remagen also lent money and took equity stakes in the two food businesses, Aussie Frozen Fruit and In2Food.
AFF was a business that bought fresh fruit from farmers and supplied it in frozen or purée form to Woolworths, Coles and other customers. In2Food, similarly, sourced fresh fruit and vegetables, and offered prepared produce for catering, retail and corporate customers, such as cruise ships.
In2Food provided fresh fruit and vegetables and catering services to customers, including cruise ships.
Last year, both those companies collapsed owing about $80 million. Raftery resigned as a director in the days prior to both companies going into liquidation. Raftery was replaced at both companies as a director by Andrew Lowy, who would also this year become a director at Indus Mining. In2Food had another director, Brett Jackson, who resigned in November 2022.
At AFF and In2Food, the liquidators have been seeking answers from Raftery.
KordaMentha’s Tony Miskiewicz and Michael Korda, the liquidators of AFF, said in a report to creditors that the company had potentially traded insolvently – meaning it couldn’t pay its debts – for around 18 months before it was wound up.
“We have identified a potential claim for insolvent trading against the former director [Simon Raftery] given he was in control of the company from inception up to two days prior to our appointment.”
The Corporations Act requires a director to take steps to ensure he or she is “properly informed about the company’s financial position and the company doesn’t trade if it is insolvent”.
“It appears the former director [Simon Raftery] allowed the company to accrue significant debt over the period 2021 to 2023,” said KordaMentha. “We consider that the former director may have contravened the care and diligence and good faith provisions of the [Corporations] Act.”
Raftery’s lawyer said in a letter that the liquidators’ reports for AFF and In2Food contained tentative remarks about possible breaches of directors’ duties, but that “no breaches have been substantiated and any suggestion they have been or are likely to be substantiated is completely false”.
The letter disputed several findings in the reports and added that a defence against Raftery potentially being disqualified as a director would be that the “companies are from the same group and would be easily demonstrable should this be required”.
Blenners Transport, a nationwide trucking company run out of Tully in Far North Queensland, was one of AFF’s small business creditors, owed $173,095. Blenners was also owed money by In2Food.
Blenners founder Les Blennerhassett, a former banana farmer, instructed his lawyer to make a court application to have AFF wound up. The court action was supported by other creditors, such as Chep Australia, which was owed $731,525, and Nationwide Waste Solutions.
Blennerhassett, whose company transports brands such as Four ’N Twenty, Sunny Queen and Yalumba, is unlikely to get any of the money he’s owed back from AFF or In2Food. He has lobbied ASIC to look into the collapse of both companies. “Even though we’ve complained to ASIC, they have done nothing,” said Blennerhassett. “I want to see him [Simon Raftery] banned as a director.”
ASIC has the power to ban a director for five years if they have been involved with two or more companies that have gone into liquidation in the past seven years, and when there is little prospect of the majority of creditors getting repaid.
Les Blennerhassett, founder of nationwide trucking group Blenners Transport.
Blennerhassett said Raftery offered for Remagen to the pay the debt owed to his trucking company by AFF. However, he also wanted a personal guarantee from Raftery. The winding up went ahead.
Blennerhassett also lobbied federal Independent MP Bob Katter to see if he could bring the failure of AFF to ASIC’s attention.
Katter met ASIC boss Warren Day and Financial Services Minister Stephen Jones last November about AFF. “They were [allegedly] trading insolvent,” said Katter.
ASIC would not confirm if it was making inquiries into the failure of AFF or In2Food. KordaMentha had sent a report to ASIC about AFF.
KordaMentha said its investigations were preliminary, and it was unable to “provide any definitive conclusions about potential inappropriate conduct, breaches of legislation that may have been committed”.
This masthead does not suggest that any inappropriate conduct has been proven against Raftery.
Remagen was both a shareholder and lender to AFF. Close to $30 million of Remagen client money went into the company, according to the KordaMentha report.
It’s understood that some Remagen clients thought they had security over a property owned by AFF, though it is not suggested investors were misled. They would later learn that a mortgage existed on that property that was held by entities associated with another lender, Gemi Investments.
More than a dozen Remagen clients, former employees, borrowers and associates, were contacted but declined to speak publicly.
Remagen clients also learned that another lender to AFF ranked ahead of them as a creditor. It was Scottish Pacific Business Finance, which was also a lender to In2Food.
Independent MP Bob Katter met with Financial Services Minister Stephen Jones and ASIC boss Warren Day to discuss the collapse of Aussie Frozen Fruit of which Simon Raftery was a director.Credit: Alex Ellinghausen
ScotPac is trying to claw back some of the almost $8 million it was owed by AFF and In2Food.
ScotPac has lodged two caveats over the title of Raftery’s waterfront house claiming interest in the property. There are also three mortgages on the property, according to title records.
Creditors are more likely to get answers as to why In2Food collapsed, with that company’s liquidators pursuing action to secure funding to hold a public examination into that business failure.
HLB Mann Judd’s Todd Gammel and Matthew Levesque-Hocking are seeking funding for that public examination from the federal Department of Employment and Workplace Relations.
In a report to creditors, Gammel and Levesque-Hocking noted that 29 assets of In2Food had two or more security interests granted over them. It meant those assets had been pledged as collateral to multiple parties.
HLB Mann Judd determined In2Food was potentially insolvent since at least June 2022, before it went into liquidation in April 2023.
“Based on the inquiries and investigations conducted into the [In2Food] companies affairs to date, it is unlikely that a dividend will be paid to unsecured creditors of the companies unless there are significant
recoveries specifically relating to the public examinations and the potential insolvent trading claim,” the HLB report found.
Remagen was a shareholder and lender to the In2Food group, where just over $14 million of client money was put into it.
Many farmers and small business owners were In2Food creditors as was the Australian Tax Office. The latter was owed about $3 million, and employees were owed $6.2 million, including superannuation payments estimated at $1.8 million.
The HLB Mann Judd report said directors could be personally liable for the tax and superannuation debts. As well, the liquidations said they had “identified a number of actions that would be considered breaches of directors duties”, which required further investigation.
Those breaches included a potential conflict arising from Raftery being a director and financier of In2Food, given “the reliance on funding and assurances of funding” that resulted in the group continuing to operate. A claim that Raftery disputes through his lawyer.
Raftery outlined a number of reasons for In2Food’s failure to HLB Mann Judd including poor integration of existing systems, processes and controls, lack of customer management, high costs, failure to raise capital from shareholders, and that he claimed to have been misled around the true status of the company when it was acquired in late 2021.
The report said further investigation was required into potential insolvent trading claims against directors.
HLB Mann Judd was sending a report to ASIC about In2Food.
The trouble engulfing Remagen and its founder, Raftery, has drawn attention once again to the private lending groups that exist outside the regular banking system, prompting debate about the need for greater transparency around the groups operating in that sector.
Meanwhile, Raftery continues to work as an adviser, and is a director of dozens of companies. He’s waiting to see if the public examination into In2Food’s collapse proceeds. The auction of his resort-style waterfront home that he so yearned to own, goes ahead on Saturday.
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