Investors could lose 90% of funds in Equititrust wind-up
In a report to investors on Friday, David Whyte - who was appointed receiver by the corporate regulator in an attempt to stem investor losses - said unitholders face losing close to 90 per cent of their money.
He said investors could expect to receive between 11¢ and 19¢ in the dollar, down from a previous estimate of 15¢ to 22¢, "due to a revision of the estimated values of certain property securities [based on offers received being less than the professional valuations held] and the accrual of outstanding rates and land tax".
The return does not include a potential claim on investor funds by the liquidators appointed to Equititrust Income Fund's former operator, Equititrust Ltd.
According to the report, the liquidators from Hall Chadwick are attempting to extract more than $800,000 in fees and expenses, which relate to their previous appointment as Equititrust's administrators.
The receivers are attempting to resolve claims associated with the founder of Equititrust, Mark McIvor. The McIvor Superannuation Fund is claiming $3.3 million in principal and interest from the Equititrust Income Fund, which would also rank before returns for its investors.
But there is a potential upside. The return estimate does not include potential wins from legal action by receivers, which include two claims for negligence and damages against a valuer that total more than $10 million. The report said the various actions were expected to yield "several million dollars" for investors.
Piper Alderman is also conducting a class action on behalf of Equititrust Income Fund investors to recover the loss on their investment. "The class action will plead a case for breach of duties by the company and several of its directors, claims of imprudent investments by the company and its directors and for other breaches of the Corporations Act," the firm said.
Equititrust Income Fund is one of $20 billion worth of investment schemes forced to freeze redemptions in 2008 after the government guaranteed bank deposits during the financial crisis.
In April 2011, as problem loans mounted and Equititrust's bankers demanded that loans be repaid, the fund stopped paying distributions to its 1500 investors. Many investors are pensioners who relied on the payments to fund basic living expenses.
More than $70 million of the fund's problem loans were linked to Dudley Quinlivan, a former two-time bankrupt who was once denounced in Queensland's Parliament as the "King Con" of property marketing schemes.
The Australian Securities and Investments Commission appointed an independent receiver to the fund in November 2011. The fate of its operator at the time, Equititrust, was sealed earlier that month when the company revealed it was unlikely to find an insurer to cover it for professional indemnity.
Frequently Asked Questions about this Article…
The Equititrust Income Fund froze redemptions after the 2008 financial crisis and stopped paying distributions in April 2011 as problem loans mounted and banks demanded repayment. A receivers’ report says unitholders now face losing close to 90% of their money due to lower-than-expected asset offers, accruals of rates and land tax, and other claims against the fund.
About $194 million was invested in the Equititrust Income Fund. The receivers estimate investors could expect between 11¢ and 19¢ in the dollar (down from a previous 15¢–22¢ estimate), meaning a potential loss of close to 90% of their investment.
The corporate regulator appointed an independent receiver in November 2011. David Whyte, the receiver named in the report to investors, provided the updated return estimates based on offers received, revised property valuations and accrued liabilities.
Yes. The receivers are pursuing legal claims — including two negligence and damages claims against a valuer with potential recoveries exceeding $10 million — which the report says could yield “several million dollars” for investors. Those outcomes are not included in the current 11¢–19¢ estimate.
Yes. Liquidators of Equititrust Ltd (the fund’s former operator) from Hall Chadwick are seeking more than $800,000 in fees and expenses, and the McIvor Superannuation Fund is claiming $3.3 million in principal and interest. These claims would rank before returns to unitholders and could further reduce payouts.
Yes. Law firm Piper Alderman is conducting a class action for Equititrust Income Fund investors alleging breach of duties by the company and some directors, imprudent investments and other breaches of the Corporations Act to recover investor losses.
The fund had about 1,500 investors, many of whom were pensioners who relied on distributions for living expenses. The fund’s problems stemmed in part from more than $70 million of problem loans linked to property marketer Dudley Quinlivan.
Investors should follow updates from the receivers’ reports (which provide revised return estimates), announcements about outcomes of the receivers’ legal actions and the progress of the Piper Alderman class action, since any recoveries or additional creditor claims will affect final payouts.
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