Banksia investors to get “significant” second payment in June as receivers aim to realise half of loan portfolio and sell defunct branches

The receivers of failed Victorian debenture issuer and mortgage lender Banksia expect to make a “significant” second payment of between and 20 and 35 cents in the dollar to investors by June 30 if it can successfully realise a portfolio of 565 loans.

In addition, the receivers will also seek to sell freehold property owned by Banksia to raise additional funds to repay debenture holders.

A first distribution payment of 20 cents in the dollar was paid to investors on December 7 out of cash holdings, the first part of an estimated total repayment to debenture holders of between 50 and 65 cents in the dollar.

Banksia operated from 10 branches across Victoria and NSW with its head office in Kyabram.

The loans have a face value of $270 million and represent the best performing loans out of a total portfolio of around 1,000 loans, which have a total face value of $537 million.

A return of between 55 to 70 cents is expected for investors in a smaller Banksia-managed fund, Cherry Fund Limited, also in the hands of the receivers.

Banksia collapsed in October putting $660 million of small investor debenture funds at risk.

In a new circular to debenture holders, McGrath Nicol receivers Tony McGrath, Joseph Hayes, Matthew Caddy and Robert Kirm report that a public marketing campaign to realise a portfolio of 565 loans commenced in the first week of February and that “strong interest has been received to date from a range of parties including significant financial institutions”.

“Whilst we are unable to disclose the likely sale price for the identified portfolio, we expect a positive outcome

“Following a staged process, we expect final offers to be received in late March 2013 and a sale announced and completed during April 2013.  Whilst this timeline may ultimately require extension, it has been structured to allow for a further significant distribution to debenture holders by 30 June 2013,” say the receivers.

The receivers have identified around 87 impaired loans with a face value of $167 million.

“As the loan book continues to be managed, it is likely that additional loans will become impaired.”

The receivers say they are working with Banksia’s impaired loans team to encourage repayment and/or refinancing and where this does not happen, they are taking enforcement action.

“The Receivers are undertaking an individually tailored realisation program for each impaired loan/security property to maximise the return to debenture holders.”

Apart from the efforts to realise the loan portfolio and sell Banksia properties, the receivers are also  working closely with “Securities Hold Co Limited in relation to the $11.2 million intercompany loan, and continuing to liaise with the liquidator of Lehman Brothers in relation to Banksia’s collateralised debt obligation portfolio”

Debenture holder have launched a class action in the Supreme Court of Victoria against Banksia and its related companies, their directors, auditors and the trustee.