Judge considers new Gippsland deal
The rescue group told the court it had secured a further $1.5 million in funding that could help buoy the company should the court agree to a recapitalisation plan.
Before sealing the fate of the lender, Justice Kathleen Farrell gave the parties until Monday to renegotiate a new deal that took into account the extra cash.
The rescue group has raised several million in funds from a consortium of community and business leaders, including former ANZ director John Dahlsen, and is asking the court to grant it two weeks to recapitalise Gippsland and avoid receivership.
The proposal faces opposition from the trustee of the debenture group, The Trust Company, and the corporate regulator.
They argue that Gippsland is insolvent and should not be incurring any further costs in the form of legal fees or expenditures.
The Trust Company argued that the rescue group was holding debenture holders "hostage" by putting forth a plan that was contrary to their interests.
"We are dealing with an application which involves discretion over how the interests of debenture holders are best served," counsel Alexander Street said.
Gippsland froze its $150 million in funds on July 19, after a review of its lending book by The Trust Company found a higher than expected level of debt.
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The Federal Court delayed a decision after a judge said she would consider a pledge from local investors to add more funds to Gippsland Secured Investments' rescue package. Justice Kathleen Farrell gave the parties time to renegotiate a deal that accounts for the extra cash and to present a revised recapitalisation proposal.
The rescue group told the court it had secured a further $1.5 million in funding and has raised several million dollars from a consortium of community and business leaders to support a proposed recapitalisation of Gippsland Secured Investments.
The rescue group is asking the court for time—specifically two weeks—to recapitalise Gippsland by injecting new funds so the lender can avoid going into receivership, and it wants the court to consider that extra funding when deciding whether to approve the plan.
The Trust Company (the trustee for the debenture group) and the corporate regulator oppose the proposal because they say Gippsland is insolvent and should not be incurring further costs such as legal fees or other expenditures. The Trust Company also argued the rescue group's plan could be contrary to the interests of debenture holders.
Gippsland froze $150 million in funds on July 19 after The Trust Company’s review of the lender’s lending book found a higher-than-expected level of debt. For investors, a freeze of funds is an indication of serious balance-sheet or liquidity concerns that prompted further court and trustee scrutiny.
The rescue group comprises a consortium of community and business leaders, including former ANZ director John Dahlsen, who have contributed several million dollars and pledged additional funding to support the proposed recapitalisation of Gippsland.
Debenture holders are central to the dispute: The Trust Company, which represents the debenture group, says the rescue plan may not serve their interests and has argued the rescue group is effectively holding debenture holders 'hostage' by advancing a plan that could disadvantage them. The court must weigh how debenture holders’ interests are best served.
The judge has allowed time for parties to renegotiate the deal to reflect the additional $1.5 million and will consider the revised proposal. The rescue group has asked for two weeks to recapitalise Gippsland to avoid receivership. Investors should watch for the renegotiated proposal, any court ruling on recapitalisation or receivership, and statements from The Trust Company and the corporate regulator.
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