Rescue attempt dropped

An ambitious attempt to rescue collapsed mortgage fund Gippsland Secured Investments has been aborted by a group of East Gippsland business leaders, labelling the plan too risky for investors.

GSI went into receivership in September, after a July review of its loan security portfolio revealed larger than expected asset write downs, freezing $143 million in funds across the accounts of 3500 private investors.

Despite bullish statements from the rescue group that its plan to recapitalise the fund was receiving widespread support from investors, the group announced on Monday it was aborting attempts to revive the fund.

Reasons given for the decision included difficulties in raising wholesale funds from banks, with the rescue group taking aim at banks’ “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,” rescue group spokesman Duncan Johnston said.

GSI’s asset and loan portfolio is now in the hands of receiver Ernst and Young, a process through which investors are hoping to see returns of at least 80 cents in the dollar.