THE Federal Court has rejected a bail-out proposal by community and business leaders for troubled rural lender Gippsland Secured Investments.
The trustee, the Trust Company Limited, is now likely to appoint a receiver today unless another resolution can be found.
The decision by Justice Kathleen Farrell in the New South Wales Federal Court brings to an end a lengthy application by a rescue group to try to pull GSI from the brink of insolvency by recapitalising it and avoiding receivership.
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 Woolworths chairman and ANZ director John Dahlsen.
GSI froze its $150 million in local investor funds in July after a review of its lending book by 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 the roughly $2.2 million in funds that had been pledged by members of the rescue group.
Counsel for the Trust Company, Alexander Street SC, told the court on Monday the rescue plan went against the best interests of debenture holders, as the funds pledged were inadequate to save the company from collapse. He described the company as a car whose “wheels have fallen off, the engine is broken and there’s no driver.’’
But the rescue group said the Federal Court’s decision was a huge blow to the Gippsland community.
The rescue group had asked the court to grant it two weeks to form a recapitalisation plan for GSI.
For more: Bid to save Gippsland lender fails