THE end of December has brought good news to account holders of collapsed financial institution Gippsland Secured Investments (GSI), with the sale of the loan books expected to be finalised in March.
Account holders of GSI also received a Christmas bonus, with a second payment received of $0.10 in the dollar.
It is the second payment after GSI receivers, Ernst and Young, paid an initial $0.15 in the dollar in early October.
GSI was a major non-bank funds manager in Gippsland, based in Bairnsdale, with an investment portfolio of $143 million.
Twelve months ago, bad debt returns had risen to 14.7 per cent of the non-bank lenders’ value.
On July 19 this year, GSI directors placed a freeze on trading.
Since then, 3500 account holders, predominantly people in Gippsland, have been unable to withdraw money from their accounts with GSI.
In the Federal Court, on September 2, The Trust Company (Trust) was placed in control of GSI’s future.
Trust appointed Adam Nikitins and Simon Cathro, of Ernst and Young, as receivers on September 3.
It is the third similar collapse of a non-bank funds manager in recent years affecting many regional and rural residents.
Banksia Securities had $660 million under management, with 15,000 investors, mostly resident in regional Victoria. It was placed in receivership last year.
South Eastern Secured Investments Ltd, a rural finance company also based in Gippsland, was placed in receivership in 2009.
On Monday, Adam Nikitins of Ernst and Young, confirmed the second payment was delivered, in the form of cheques, to note-holders in time for Christmas.
He also confirmed the sale of the loan books for GSI was proceeding and expected to be finalised by the end of March.
“A further, significant and substantial payment, should then be able to be made to note-holders fairly promptly, in April,” Mr Nikitins said.
“It is unlikely to be the final payment and we are still aiming to return between $0.80 to $0.90 in the dollar to note-holders.
“We are currently going through a loan book sale process which concludes by the end of March.
“We have broken down the loan book into several options based on value.
“My preference has always been to do a whole loan book sale.
“Tenders for the sale closed last week – we have shortlisted and are now undertaking due diligence, which we expect to finalise by January 15.
“We will then make decisions based on that due diligence.”
However, loans from GSI’s single largest debtor, Riviera Properties Limited Group (RPL) may not be included in that sale, with news last week of its collapse and GSI’s receivers moving quickly to sell the encumbered properties.
A major property developer in East Gippsland, after some months of review, in early December RPL submitted a plan to GSI’s receivers to demonstrate how it could continue to trade, through debt reduction, further subdivision approvals and recapitalising and refinancing the company later in 2014.
On December 6, GSI advised it did not accept RPLs plan and would issue notices of demand upon RPL Group and Paynesville Waterfront Pty Ltd and the Beaches Joint Venture for repayment of their debts.
The Directors of RPL consequently placed the company in receivership last week.
A director of RPL was also on the board of GSI and was its ex-managing director.
GSI’s receiver Mr Nikitins confirmed the relationship between GSI and RPL was questionable, including the state of the loan and the business arrangements between the two entities.
“Whilst we will investigate all aspects of the conduct of GSI and its directors, including the conduct of its largest debtor, RPL Group, at the moment our priority remains maximising returns to noteholders,” Mr Nikitins said.
“Our current priority is focussed on getting as much money as possible as quickly as possible into the pockets of noteholders.
“We still expect to return between $0.80 and $0.90 to noteholders.”
David Grbin, an executive at the Trust Company, which appointed GSI’s receivers, said an examination of the company's books revealed mismanagement before its collapse, leading to a situation where loans exceeded the capital available.
RPL has been a leading property development organisation, for more than 30 years, in the Gippsland Lakes and East Gippsland region and focuses on waterfront property and residential and lifestyle developments.
Properties owned by the company at Paynesville have recently sold for up to $450,000 and, at King’s Cove Metung, for up to $350,000.
Mr Nikitins confirmed more than 80 lots at Paynesville and Metung, including marina berths, and some land at Bairnsdale, will be auctioned on February 9.
“This is a significant land sale and is an opportunity for people in East Gippsland to get hold of some really nice properties, including marina berths,” Mr Nikitins said.
“We are aiming to maximise value for all Riviera Properties creditors, of which GSI is the most significant.
“Initially, RPL’s loans were included in the loan book sale.
“However, GSI has taken possession of the underlying collateral and is aiming to maximise value of all RPL properties.”
RPL owned some properties outright and some in partnership with other entities, including entities with the same directors.
