Equititrust receivers report unitholders to lose close to 90 pc
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 expected 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 latest return does not include a potential claim on investor funds from the liquidators appointed to EIF's former operator, Equititrust Ltd. According to the report, the liquidators from Hall Chadwick are now attempting to extract more than $800,000 in fees and expenses that relate to their previous appointment as Equititrust's administrators.
The receivers are also attempting to resolve claims associated with the controversial founder of Equititrust, Mark McIvor. The McIvor Superannuation Fund is claiming $3.3 million in principal and interest from the EIF that would also rank ahead of returns for its investors.
But there is also potential upside.
The return estimate does not include potential wins from legal action the receivers are conducting, which includes 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, "although this may take some time to realise".
Piper Alderman is also conducting a class action on behalf of EIF 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," said the law firm.
EIF 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 for 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 marketeering 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 receivers' update said unitholders in the Equititrust Income Fund (EIF) face a virtual wipe-out, potentially losing close to 90% of their money. The report reflects a severe reduction in expected recoveries for investors.
About $194 million was invested into the Equititrust Income Fund (EIF), according to the receivers' report referenced in the article.
The receivers estimated investors could expect between 11¢ and 19¢ in the dollar, down from an earlier estimate of 15¢ to 22¢. The revision was attributed to lower-than-expected offers for certain property securities and accruals such as outstanding rates and land tax.
Yes. The report notes liquidators of the fund’s former operator, Equititrust Ltd (Hall Chadwick), are seeking more than $800,000 in fees and expenses. The McIvor Superannuation Fund is also claiming $3.3 million in principal and interest, and such claims would rank ahead of returns to ordinary unitholders.
Potential upside exists: the receivers are pursuing legal actions including two negligence and damages claims against a valuer totalling more than $10 million. Piper Alderman is also running a class action on behalf of EIF investors seeking to recover losses for alleged breaches by the company and directors. The report said these actions might yield "several million dollars," though it could take time to realise.
EIF was among investment schemes that froze redemptions in 2008. In April 2011, as problem loans mounted and the fund's bankers demanded loan repayments, the fund stopped paying distributions to its roughly 1,500 investors. Many of those investors were pensioners who relied on the payments for living expenses.
Key parties mentioned include the corporate regulator ASIC (which appointed an independent receiver in November 2011), the fund operator Equititrust Ltd, the receivers led by David Whyte, liquidators Hall Chadwick, the controversial founder Mark McIvor (and his McIvor Superannuation Fund), the valuer facing negligence claims, law firm Piper Alderman (running the class action), and loans linked to Dudley Quinlivan.
The article highlights several cautionary points: schemes that promise modest but safe returns can still carry heavy risks; pensioners and income-dependent investors are particularly vulnerable if distributions stop; frozen redemptions and problem loans can sharply reduce recoveries; and the absence of professional indemnity insurance for operators (as noted for Equititrust) can complicate investor protection and recovery efforts.
Call 1300 880 160
Start a chat
Schedule a call
