Run fear sparked freeze on funds
FEARS of a run on Southern Finance prompted its trustees to get a court order freezing investors' money until the group was sold to Bendigo and Adelaide Bank, it has emerged.
FEARS of a run on Southern Finance prompted its trustees to get a court order freezing investors' money until the group was sold to Bendigo and Adelaide Bank, it has emerged.The Trust Company became nervous after rural investment group Banksia Securities collapsed in late October. The trustees asked the Federal Court in New South Wales on November 23 for an order preventing Southern Finance from paying any money to debenture holders, who collectively hold more than $200 million in investments.The Warrnambool-based Southern Finance is also barred from accepting any more money from investors for debentures.Southern Finance was also ordered to return any money received by electronic transfer until the order was lifted.A spokesman for The Trust Company told BusinessDay: "As trustee for the notes issued by Southern Finance Limited, it is our role to act in the best interests of the noteholders in exercising our powers under the trust deed and the law."Details of the matter are still subject to a suppression order, but a hearing before Justice David Yates was made in open court on Tuesday and can now be reported.Speaking for Southern Finance, Robert Newlinds, SC, said the trustee began asking questions after Banksia Securities collapsed because "there was a perception" that investors would rush to collect debentures issued by similar businesses.Southern Finance customers had been kept in the dark about the trustee's legal action because both sides wanted to avoid worrying them unnecessarily, Mr Newlinds said.The Trust Company applied to the court for a freezing order, which was granted on November 26 - a day before Bendigo and Adelaide Bank announced it was close to acquiring Southern Finance's $290 million loan book and equipment finance business. A transaction is expected to be announced in the next few days.The trustee supported the sale of Southern Finance, Mr Newlinds said, and final documents are expected to be signed within days.