Investors in troubled rural lender Gippsland Secured Investments face an uncertain future after the Federal Court rejected a bailout proposal by community and business leaders.
The decision by Justice Kathleen Farrell in the NSW Federal Court brings to an end a lengthy application by a rescue group to try to bring Gippsland back from the brink of insolvency by recapitalising it.
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. The trustee, the Trust Company Limited, is now expected to appoint a receiver as early as Tuesday unless another resolution can be found.
Gippsland froze its $150 million in local investor funds in July after a review of its lending book revealed higher-than-expected debt. Its roughly 3500 account holders are mostly members of the Gippsland community.
Justice Farrell expressed concern about the rescue plan on Monday, calling it "amorphous" and questioning the availability of approximately $2.2 million in funds that had been pledged by members of the rescue group. She also warned that the impact of a receivership on a small community could be huge, urging the trustee to keep it in mind when deciding how to proceed.
"In a large city, the appointment of a liquidator or receiver can have a small affect. In a small city, it can have a big one," she said.