Gippsland lender has one day to rescue company
It is the second reprieve for the non-bank lender, which was forced to freeze $150 million of local investor money in July following a review of its lending book.
On Thursday, the corporate regulator made a last-minute move to wind up the company, claiming a rescue group has failed to come up with a sufficient proposal to keep the company afloat.
The rescue group told the court on Friday it had come up with $300,000 in additional funds to keep the company afloat for another two weeks.
Despite this, the trustee said the rescue package was still "utterly inadequate" given the company remained "$7 million under" in terms of impairments.
"The company is insolvent," counsel for The Trust Company, Alexander Street, SC, told the court. "If that is the case, it should not incur one cent." Mr Street also raised the question of whether the extra $300,000 was a gift, or whether it would need to be repaid. "Where is it going? Who is going to receive it?" he asked.
Justice Kathleen Farrell said aspects of the rescue proposal needed to be firmer and gave the rescue group until Monday to provide more details.
During proceedings, the trustee tabled a number of documents in court as evidence of "incompetence" by management in the lead-up to the fund freeze.
Mr Street described Gippsland Secured Investments' balance sheet as a "moveable feast" due to the number of inconsistencies relating to the company's impairments.
But Justice Farrell would not accept all of the documents, ruling in favour of the rescue group, which claimed it was not in a position to respond to claims of "dishonesty".
Any move to put GSI into receivership could cast doubt on whether the debenture firm's 3500 mostly Gippsland-based investors will be able to recover all of the $150 million they have pumped into the company.
The Australian Securities and Investments Commission has told the Federal Court that it has "substantial concerns" about the $7 million rescue package and that it believed it should be wound down.
The hearing continues on Monday.
Frequently Asked Questions about this Article…
The Federal Court has given troubled rural lender Gippsland Secured Investments another short reprieve to put forward a firmer rescue proposal before the corporate regulator moves to wind the company down. This is the second extension after GSI was forced to freeze investor funds earlier.
GSI was forced to freeze about $150 million of investor money after a review of its lending book raised concerns. That freeze followed questions about the accuracy of the company’s impairments and overall balance sheet.
The article says roughly 3,500 mostly Gippsland-based investors have pumped about $150 million into the debenture firm, and that money has been frozen while the company’s future is decided.
A rescue group told the court it could provide an additional $300,000 to keep the company afloat for about two weeks, but the trustee described that package as “utterly inadequate,” noting the company remained about $7 million short in impairments.
The trustee (The Trust Company) told the court the company is insolvent and raised doubts about whether the extra $300,000 is a gift or repayable. ASIC told the court it has “substantial concerns” about the rescue package and argued GSI should be wound down.
Justice Kathleen Farrell said parts of the rescue proposal needed to be firmer and gave the rescue group until Monday to provide more details. She did not accept all documents put forward by the trustee and the hearing continues on Monday.
Yes — the corporate regulator has moved to wind the company down, and any move to put GSI into receivership could cast doubt on whether the roughly 3,500 investors will be able to recover all of the $150 million they invested, according to the article.
The article highlights uncertainty and a short timeline: investors should watch developments from the Federal Court hearing (the next sitting noted is Monday) and statements from the trustee, the rescue group and ASIC, since those will clarify whether the rescue proposal is strengthened or whether the company will be wound down.
Call 1300 880 160
Start a chat
Schedule a call
