THE GSI Rescue Group has withdrawn from its attempt to recapitalise Gippsland Secured Investments.
The Gippsland financial institution, which managed $143 million in funds across 3500 accounts, suspended access to GSI accounts in July after concerns were raised about its solvency. The company went into receivership on September 3.
The group of Gippsland business leaders had worked for weeks on a plan to recapitalise the business, which they hoped would return up to 100 cents in value to GSI note holders and allow the business to continue to trade.
“This has been a long and exhaustive process and we have done everything we can, but we believe recapitalising the company carries too much risk for the note holders,” a spokesman for the Rescue Group, Duncan Johnston, said.
“We wanted to give GSI the best possible chance of survival and believed it could continue to operate with a cash injection, a changed structure and improved management and governance.
“We have done everything we could to try to make this happen and we are bitterly disappointed with this outcome.”
Under the plan, the Rescue Group, which included Richard Rijs, Ray Hack, John Dahlsen, Bill Dahlsen and Harry Rijs, hoped to restructure the business. If successful, it would allow GSI to trade out of trouble and continue to serve the Gippsland community.
Reasons for the decision include the difficulty in raising wholesale funds from the banks because of their attitude towards lending to non-bank financial institutions, particularly in relation to regional and small companies.
“The situation has not been helped by the regulator, which wants to increase the capital required to operate GSI and other small lenders, giving significant advantage to the major financial institutions,” Mr Johnston said.
“Many of our regional success stories would not have happened if businesses had been forced to rely on lending decisions made in the city headquarters of Australia’s major banks.”
Despite strong community support, it also was difficult to forecast the retention and conversion of existing notes to the new business model because of the delays, and uncertainties created in the minds of note holders.
Mr Johnston said the group was extremely grateful for the backing of the note holders and the generosity of Gippslanders who, despite tough economic times, were prepared to commit millions to the recapitalisation effort and continued to offer support as the group overcame myriad hurdles.
“Rescue Group members have spent an enormous amount of their personal money and time to try to make this work. Throughout this process, the Gippsland community has rallied with unprecedented support for our work and this gave us the heart to continue.
“Our goal all along was to best serve the needs of the GSI deposit holders and the Gippsland community generally. We want them to know that we did everything we could. GSI has made an invaluable contribution to Gippsland over more than 40 years. It will be sorely missed if it is broken up and sold off.”
Mr Johnston said Rescue Group members would be available to help the GSI note holders committee, which had an important role to play in protecting the interests of all note holders.
The GSI Rescue Group will not be making further comment.