Gippsland collapse hits local community
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.
Frequently Asked Questions about this Article…
Gippsland Secured Investments was placed into receivership after freezing investor funds. The Trust Company, acting as trustee, appointed Ernst & Young partners Adam Nikitins and Simon Cathro as receivers following an exhaustive review of options. A preliminary look at the books pointed to management shortcomings and a deficiency of tangible assets to meet obligations, which contributed to the decision.
The article states about $143 million in local savings are at risk after GSI’s collapse, leaving many local investors worried about their funds.
Yes. A group of local investors had pledged $2.2 million toward a recapitalisation plan, including funding from a consortium with figures such as former ANZ director John Dahlsen. The rescue proposal was rejected by Justice Kathleen Farrell in the Federal Court, who said she did so with "great regret," ending the lengthy attempt to avoid receivership.
Ernst & Young partners Adam Nikitins and Simon Cathro were appointed as receivers by The Trust Company. As receivers they will manage the company’s affairs, assess assets and liabilities and oversee the process of recovering funds for note holders, following the trustee’s finding of management and asset shortcomings.
Local leaders say the collapse will hit the community hard. Residents fear serious economic repercussions: investors like farmer Lea Worseldine may lose substantial savings, and local figures warn the region could lose a lender that supported projects the big banks wouldn’t fund. The council has engaged groups such as Anglicare and the Salvation Army to make assistance packages available to those severely affected.
The GSI collapse follows last year’s failure of non‑bank lender Banksia Securities, which also affected Victorian investors. The article notes this sequence of non‑bank failures has been a fresh blow to investors in the region.
The article does not provide a firm recovery estimate. A local investor expressed hope of getting around 85 cents in the dollar if recoveries go well, but the trustee’s comments about a deficiency of tangible assets highlight ongoing uncertainty about final recoveries.
East Gippsland council has enlisted non‑government organisations including Anglicare and the Salvation Army to prepare assistance packages for community members who are severely affected. Legal and receivership processes will continue separately to determine creditor recoveries.
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