BENDIGO AND ADELAIDE BANK has threatened people who borrowed money to pump into Great Southern Group's failed managed investment schemes with bankruptcy and the loss of their assets if they continue to refuse to repay their loans.
In a move designed to undermine the prospect of further class actions against the bank over its funding links to Great Southern, the managing director of Bendigo, Mike Hirst, has warned the "refuseniks" that it will chase them through the courts if necessary to recover its money.
He has also sought to dissuade them from contributing any further money to the class action cases being planned by lawyers Macpherson Kelley, saying that the claims made to date "overstates the merits" of the one matter before the courts at present.
Mr Hirst's comments are contained in a letter that has been sent to 1320 borrowers who are holding out against repayment in the hope that the class action launched by the law firm will extract them from the financial predicament.
As many as 15 actions are being contemplated by Macpherson Kelley to cover each of the individual agribusiness investment schemes operated by Great Southern, which collapsed under hundreds of millions of dollars of debt in May last year. So far, one action covering two of the schemes established since 2005 has been lodged with the Victorian Supreme Court.
Investors borrowed huge sums of money from lenders such as Bendigo to acquire their holdings and have alleged that Great Southern failed to properly disclose key facts about the sustainability of what were promoted as long-term projects. They also claim that, as a consequence, the loans provided by Bendigo were either void or unenforceable.
Bendigo has about $550 million of outstanding loan exposures to the Great Southern investment portfolio and has made a provision of $27 million for likely losses.
In his letter posted yesterday, Mr Hirst said that before borrowers consider making another contribution to the law firm's class action fighting fund they should "seriously consider" the risks of not repaying their loans.
The consequences could range from higher loan repayments and penalty interest rates to people putting their personal assets at risk. They could also "potentially face bankruptcy", he added.
At the same time, borrowers should not assume that their investments in Great Southern were worthless, given the efforts being made to try to preserve value for grower investors.
Speaking to BusinessDay about the letter, Mr Hirst said there was no conflict with the bank's image as a community-based institution and its approach to the Great Southern borrowers.
"We wanted to make it very clear of these consequences," he said. "You don't gild the lily on something like this."
Frequently Asked Questions about this Article…
What warning did Bendigo and Adelaide Bank give Great Southern borrowers about unpaid loans?
Bendigo and Adelaide Bank, via a letter from managing director Mike Hirst to about 1,320 borrowers, warned that customers who refuse to repay loans linked to Great Southern Group schemes could face higher repayments, penalty interest rates, loss of personal assets and that the bank may pursue them through the courts — potentially leading to bankruptcy.
Why is Bendigo discouraging borrowers from contributing to the Macpherson + Kelley class action?
Mike Hirst said the claims so far ‘overstate the merits’ of the matter before the courts and urged borrowers to ‘seriously consider’ the risks of not repaying their loans before putting more money into the Macpherson + Kelley class action fighting fund.
How much exposure does Bendigo have to the Great Southern investment portfolio?
The bank has about $550 million of outstanding loan exposures to the Great Southern investment portfolio and has made a $27 million provision for likely losses related to that exposure.
What are investors claiming about Great Southern and the loans they took out?
Investors who borrowed to buy into Great Southern schemes allege the company failed to properly disclose key facts about the sustainability of the projects, and some claim the loans provided by lenders such as Bendigo were void or unenforceable.
What legal actions have been launched or proposed over the Great Southern schemes?
Lawyers Macpherson + Kelley are contemplating as many as 15 separate actions to cover individual agribusiness schemes run by Great Southern; so far one action covering two schemes established since 2005 has been lodged with the Victorian Supreme Court.
Could Great Southern investments still have value despite the collapse?
According to Mike Hirst, borrowers should not assume their Great Southern investments are worthless, given ongoing efforts to try to preserve value for grower investors.
What specific consequences did the bank outline for borrowers who continue to withhold repayments?
The bank warned consequences could include higher repayments, penalty interest, the risk of lenders seizing personal assets and, if necessary, the bank pursuing recovery through the courts which could potentially lead to bankruptcy.
Does Bendigo believe its approach to Great Southern borrowers conflicts with its community-bank image?
Mike Hirst told BusinessDay the letter and the bank’s stance did not conflict with its community-based image, saying the bank simply wanted to make the potential consequences of not repaying very clear.
Call 1300 880 160
Start a chat
Schedule a call
