Gippsland collapse hits local community
Community leaders in the Victorian town of Bairnsdale have expressed doubt about the region's financial future after rural lender Gippsland Secured Investments was placed into receivership, leaving $143 million in local savings at risk.
The collapse of the non-bank lender, which froze investor funds last month, comes as a fresh blow to Victorian investors after the collapse of non-bank lender Banksia Securities last year.
The folding of GSI follows a drawn-out battle in the Federal Court to try to save the company by a group of local investors who had pledged $2.2 million to a rescue package. The bailout proposal was thrown out on Monday.
Gippsland cattle farmer Lea Worseldine said she had a "substantial" amount of money tied up in GSI which she was anxious about losing. She started farming with her husband Barry through a loan from Banksia Securities 33 years ago and had lost a small amount when it collapsed.
"The repercussions for the township are going to be horrendous. If we get 85¢ back [on the dollar], I guess that's better than nothing. We could use the money though," she said.
On Tuesday, trustee the Trust Company appointed Ernst & Young partners Adam Nikitins and Simon Cathro as receivers of the company.
David Grbin, an executive at the Trust Company, said a cursory examination of the company's books revealed mismanagement before its collapse.
"The evidence to date points to management shortcomings that led to a deficiency of tangible assets to meet GSI's obligations to note holders," he said.
He said the decision to appoint receivers came after an "exhaustive examination" of other options.
East Gippsland mayor Dick Ellis said the council had enlisted several non-government groups including Anglicare and the Salvation Army to make assistance packages available to members of the community who were severely affected by the collapse.
The decision by Justice Kathleen Farrell in the NSW Federal Court on Monday ends a lengthy application by a rescue group to try to pull GSI from the brink of insolvency by recapitalising and avoiding receivership.
Justice Farrell said it was with "great regret" that she rejected the rescue group's proposal, which involved funding from a consortium of local business figures, including former ANZ director John Dahlsen.
Mr Dahlsen said on Tuesday that the collapse of GSI would have a dramatic effect on the region's economy.
"We're going to lose a company that's been bankrolling a number of local investments and local projects in the area that the big banks wouldn't touch," he said.