Creditors vote to wind up LM Investment Management with possible action against directors

Gold Coast property developer and mortgage fund manager LM Investment Management has been placed in liquidation.

Creditors voted to wind up the company at a meeting on the Gold Coast yesterday.

“The Administrators have advised that at a creditors meeting held yesterday creditors voted that LM Investment Management Limited (LMIM) be placed into liquidation and that the administrators, Ginette Muller and John Park be appointed the liquidators to wind up the Company,” said a spokesperson for FTI Consulting.

LM Investment Management said it managed around $3 billion of funds under management before it collapsed in March this year with its various mortgage funds promoted in over 70 countries through a network of financial advisers.

However, the book value of LMIM’s assets is just $7.934 million, just a fraction of the  $400 million poured into LM mortgage funds by overseas investors, reported the Gold Coast Bulletin.

Its biggest residential project is the Maddison Estate Development in Pimpama which was lent $249 million through the LM Managed Performance Fund.

Ahead of the creditors meeting, an administrators’ report sent to creditors on July 25 recommended that it would be in the best interests of creditors for the company to be wound up.

“In our view, the winding up of the company is the best option for creditors. If creditors resolve to wind up the company, Liquidators will be appointed to realise the company’s assets for the benefit of creditors,” said of John Park and Ginette Muller of FTI Consulting.

“This option also allows voidable transactions, insolvent trading, breaches of director duties and other offences to be investigated more thoroughly.

“If the company is wound up, creditors with guarantees from the company’s director(s) could pursue the director for those debts immediately.”

FTI Consulting said that at this stage the estimated dividend to creditors for winding up the company is unknown.

“We anticipate a dividend to creditors may be distributed in liquidation, however at this stage we are unable to quantify the amount of such a dividend due to the commercially sensitive nature of the property-related assets of the company and the unknown recoveries in relation to voidable transactions,” the administrators said.

The administrators also said their investigation had found some evidence to indicate that the company may have traded whilst insolvent for a period and entered into certain transaction that may be voidable against a liquidator.

The administrators also said investigations revealed that some LMIM directors may be guilty of various offences committed prior to the appointment of the administrators.

ASIC is seeking orders in the Queensland Supreme Court that liquidators from PricewaterhouseCoopers be appointed to wind up the $326 million LM First Mortgage Income Fund (FMIF).

The fund is the subject of a dispute over who should be the responsible entity. Deutsche Bank appointed receivers from McGrathNicol to manage the fund whilst Trilogy Funds Management Limited seeks control.

Deutsche Bank has provided a line of credit facility worth $25 million to the fund.

A judgement on who should control the fund has not yet been made.

Trustees of the $400 million LM Managed Performance Fund are demanding that group founder Peter Drake pay back more than $17 million in loans.