Receivers for collapsed non-bank lender Banksia Securities say investors will receive a “meaningful return” on their investment, but are not likely to recover all of their funds.
Receivers McGrathNicol were appointed to Banksia Securities Limited late on Thursday after a review of Banksia’s lending book showed it was heading towards “negative net equity”.
Banksia – which has offices across regional Victoria, including one in Bendigo – owes about $660 million to some 3000 investors, advanced to borrowers primarily to finance property purchases.
The Bendigo office was closed yesterday and a sign in the window informed investors all interest payments and redemptions had been frozen.
The notice attracted interest from onlookers throughout the day, many of whom had money tied up in Banksia and were alarmed at the prospect of losing their life savings.
“We’re not happy,” one woman said. “That’s our retirement.”
The receivers will now look at a sale strategy for the assets of Banksia, starting with a detailed review of the company’s business and loan portfolio.
At statement from the receivers late yesterday said they were unable to provide details on the size of the return but would be able to give more information at a meeting with investors within five weeks.
“While it is not expected that debenture holders will recover all of their funds, the receivers do anticipate debenture holders will receive a meaningful return on their investment,” the statement read.
“It is our objective to start to make an initial return of capital to debenture holders within eight weeks.”
Premier Ted Baillieu said the collapse was a significant concern for regional Victoria.
At a press conference in Bendigo yesterday, Mr Baillieu said Banksia came under Commonwealth regulation and that it was not a bank and not covered by any deposit guarantees.
He would not comment on whether the collapse raised concerns about people pulling out of other non-bank schemes.
But Mr Baillieu said he had met with the receivers yesterday and would be working with them on a detailed assessment of the situation
“The state and Commonwealth will work together in regards to any emergency assistance that may be necessary,” he said.
“The first port of call there will be to Centrelink on 132 850 or through local government.”
Rural Finance Corporation has also stepped in to assist with any inquiries investors might have. They can be reached on 1800 260 425.
Banksia is based in Kyabram and a large portion of its client base is from rural areas.
Victorian Farmers Federation president Peter Tuohey said a huge number of farmers had invested their savings and working capital in the company.
“Farmers have been going through a tough few years, with the drought and the floods, and this is a pretty large setback again which is making it pretty difficult,” he said.
Banksia Securities is owned by Banksia Financial Group, which also owns Banksia Mortgage Fund, a registered mortgage investment fund.
While the receivers’ control is limited to the securities company, Banksia told investors in a statement that the group’s other entities “will be considering the implications (of the receivership) for them”.