Whilst it is not our usual policy to post replies on websites such as this, a valued investor has drawn our attention to the misinformation and untruths that have been posted and it would be remiss of us not to at least demonstrate their inaccuracy. That said, we do not feel that it is productive to enter into an ongoing dialogue re same and as such our posting will not be a regular occurrence. Viewers should not read anything into our failure to reply other than that we do not consider it to be an appropriate use of resources. In fact, in our view, those participating in this site are most likely not investors at all but rather disgruntled borrowers against whom we have been forced to act due to them defaulting on loans.
If any genuine investor has any concerns with their investment at Equititrust then, as always, we remain committed to addressing such concerns. Having said this, I think the appropriate way for this to be done is by them contacting us individually. As always, we shall be open and transparent in all our dealings.
By way of example only, I shall address the matters raised by “kostag” (whose name incidentally is strikingly similar to an associate of a former recalcitrant borrower of Equititrust’s) in his latest post of earlier today. I shall use the same numbering system as that adopted by him.
1. Funds from new investors have not been used to repay bank debt – such repayments (which total $96m) have been generated from loan collections. In addition, outstanding redemptions are actually approximately $40m and not over $50m as outlined as many have voluntary converted to term investments;
2. Changes to a Board are not at all unusual (particularly when one considers how long they have been on it). One only needs to look at the calibre of those that have joined the Board to see how the changes have strengthened the Board composition and not weakened it. I can confirm that the changes were instigated internally in order to provide a greater corporate governance framework and that both Mr McIvor and Mr Chaney expressed complete support for the changes;
3. Whilst the reference to MFS is hardly worth commenting on given the clear misrepresentation of the true position, it is worth noting that Mr David Anderson is not on the Board as outlined and at no time have either Mr Anderson or Mr Kennedy been castigated or criticised by the Court on any occasion regarding their involvement in MFS. Incidentally, Mr Kennedy was only at MFS for approximately 9 months and left some 6 months before it collapsed;
4. KPMG is one of the four largest audit and accounting firms in the world. It has a niche in auditing financial organizations and in fact is also the auditor of ANZ Bank, Suncorp and one of the largest banks in the world, HSBC to name but a few. It is also the only Big 4 firm with a serious presence on the Gold Coast and as such it is hardly of significance that both MFS and Equititurst shared the same audit firm (although it should be noted that the MFS audit was conducted out of Melbourne);
5. Staff resources have been increased in order to protect investor’s interests as a much greater degree of time is required to be spent monitoring and managing our loan book post GFC. This is consistent with similar increases in our Big Four banks loans management departments post GFC. It would be irresponsible for us not to have done this. The significant increase is costs is being entirely borne by the Responsible Entity and not by investors;
6. Landsolve was not created to take control of bad loans and not one single loan has been “moved across” to Landsolve as suggested. The birth of Landsolve is a recognition that the world post-GFC is a very different place and that development lending moving forward will need to be managed in a very different way. The suggestion that the financial reports “record little if any bad or default debt” is simply wrong. Almost $40m worth of loans have been impaired over the past three years to recognise falls in property values and potential unrecoverability of same. As Landsolve has no debt or any loans there is no “bad” debt hidden away as suggested;
7. The NAB LVR Ratios have not been breached as alleged. The rest of point 7 contains pre speculation which is entirely untrue;
Equititrust is supportive of the right for one to express an opinion but is concerned when posts such as those by Kostag and Olman contain numerous and repeated errors and conclusions that a reasonable person could not possible reach.
The facts speak for themselves:
(i) In its 17 year history no investor has ever suffered a loss with Equitirust;
(ii) Income distributions have always been paid in full and on time;
It is unfortunate that redemptions have been frozen and this is regrettable but we had little choice once the federal government decided to guarantee bank deposits and banks decided (notwithstanding such guarantee) to unilaterally curtail credit provision across the country. It is with some degree of pride that we have managed to pay distributions throughout – something that Commonwealth Bank’s own mortgage fund has not been able to do.
As I said at the beginning, any genuine investor can call us at anytime should they have any concerns about their investment. I personally invite both Kostag and Olman to contact me personally should they continue to have any concerns about the financial position of Equititrust and I will be sure to provide them with an transparent and honest assessment of same.
Regards
David Kennedy
Chief Executive Officer
I refer to the posts of Olman and Kostag.
Your posts raise some relevant points which, if based on accurate information, would have merit. Unfortunately they appear to be based on either inaccurate or misunderstood information.
It is simply inappropriate for us at Equititrust to continue a dialogue on a forum such as this. Once again I invite both of you (or any other investor) to contact me should they have any genuine areas of concern and I will address them. If, after speaking to me, you wish to continue to post comments, that is a matter for you but at least you will be better informed prior to doing so.
What I will say is this:
(i) The two directors who have retired from the Board have done so by mutual agreement at the company's instigation in order to inject fresh blood onto the Board. They have not resigned due to any dissatisfaction with the way the company has been operated and Equititrust is extremely grateful for the role they have played in Equititrust's development;
(ii) Equititrust Ltd has taken no dividends whilst the fund has been frozen and has received no net cash distributions on account of its subordinated yield. Almost all of the yield on the subordinated investment of circa $10m has been utilised to fund impairments on various loans in order to shield such impairment from investors. The balance has been used to fund operating costs (for which the management fee is insufficient). Whilst Equititrust is entitled to use its principal subordinated investment to absorb such impairments and take the cash distribution it has not done so. It has made a conscious decision to leave its subordinated investment at $40m in the Income Fund and to use its distribution instead to absorb such impairments and operating costs which could have been charged to the funds. There can be no doubt this has provided additional protection to investors over and above what is required;
(iii) Mark McIvor remains firmly in control of Equititrust and his commitment to protect investor's interests has not wavered. Furthermore, his investment in Equititrust has continued to increase over the past two years.
I further confirm that no Equititrust shareholder has received any net distribution from the subordinated yield whilst the Income Fund has been frozen.
Finally, on a personal note the continued references to MFS and myself are misguided and ill-informed. I was employed at MFS for a little over 9 months and left 6 months before it collapsed. The Court records (to which Kostag alludes) show that my employment was terminated when I raised corporate governance issues with the then CEO which were exacerbated after I refused to backdate various documents. At no stage have I been criticized for any part of the role I played at MFS - in fact quite the opposite has transpired.
As discussed above, I feel it is inappropriate to continue this dialogue and therefore won't be posting in this capacity again.
Regards
David Kennedy
Chief Executive Officer
It is not unusual in our industry to have recalcitrant borrowers attempt to cause damage to Equititrust’s reputation by making untrue or ill-conceived allegations against us. The common thread of such accusations tends to be that they are only ever made anonymously and when invited to discuss their issues directly with Equititrust the invitation is never taken up yet the accusations continue. By way of example, “Kostag” has been invited on numerous occasions to contact me yet he has declined to do so. Instead he continues to make unsubstantiated or erroneous allegations. I do not intend to further address matters raised by him on this forum.
In relation to the comments of zencorp (who incidentally has just joined the website and does not state whether or not he is an investor but states he has knowledge of our loan documents which may suggest he is in fact a borrower), I point out the following:
(i) Moribund Pty Ltd does not have Receivers appointed to it as zencorp says. Moribund (as the name suggests) has not traded for approximately 10 years and a Liquidator was appointed at the company’s own instigation to facilitate tidying up its affairs. It is not at all unusual for a company in a group to be wound up when it is no longer used;
(ii) Moribund was never called M C Mortgage Management Pty Ltd as zencorp alleges. He is simply mistaken in this regard notwithstanding his suggestion that care has been taken in tracing Equititrust’s history and “that there is no mistake here”;
(iii) The ill-founded suggestion that “it is obvious that the current directors of Equititrust Ltd devised a plan whereby the company’s name was changed to Moribund and Wayne was to take the fall” is not supported by the facts. Four out of the five current directors of Equititrust were neither directors nor employed by Equititrust when the name was changed to Moribund in October 2009. In fact Wayne was still a director at that time so to use zencorp’s logic, Wayne himself must have voted for the name change to set himself up for a fall. The suggestion is incorrect and untrue;
(iv) There was nothing for Wayne McIvor to take the fall for with respect to Moribund. He left Equititrust voluntarily to pursue other interests, one of which is Insight Equity Ltd. Insight Equity was established by a former Equititrust employee and it is therefore not at all unusual that he invited Wayne to join him after he left Equititrust. Insight Equity has a different model to that of Equititrust and is not a direct competitor of Equititrust as zencorp alleges. I understand that those associated with Insight Equity agree that we are not competitors;
(v) The court transcript comments referred to with respect to me are simply untrue. There was never a suggestion during my examination (and I might add approximately 20 people have been examined to date as part of the MFS administrations) that I can’t even read a document. Furthermore, and more importantly, it is impossible for zencorp to have seen such a transcript as it is sitting on my desk at home as I am still reviewing it for accuracy before I sign it and it is finalised. Perhaps zencorp may enlighten us as to his alleged source in this regard?;
(vi) To answer the question why CBA, NAB and BOSI have retreated out of the EIF and EPIF, one has to look at their individual circumstances. CBA have publicly acknowledged they want to withdraw from the entire mortgage fund industry (as a result of losses they have incurred in this sector) and have in fact wound up their own mortgage fund. NAB have decided they are overweight in the property sector and as such do want a long term relationship in this industry. They have indicated they would be prepared to entertain discreet lending opportunities with Equititrust and its customers. They have also stated that there is no risk of them losing any money with Equititrust. Finally, BOSI are withdrawing from Australia and repatriating capital back to the UK. This is well known by everybody in the financial world. The withdrawal of the banks in a tight credit market is not at all unusual and is not reflective of their attitude to Equititrust as a company. Put simply, their appetite to lend to this industry has changed and we respect that;
(vii) The comments regarding the Priority Class Fund show that zencorp, at best, misunderstands the fund. It is not borrowing more to get out of debt, it is substituting one debt for another which has more attractive terms. It is ,in effect, refinancing existing debt and it is being done for the following reasons:
(a) When the banking facilities were established/utilised, the banks were offering debt at interest rates which significantly lowered our cost of capital. With a tightening credit market and rising interest rates this is no longer the case and as such it was considered appropriate to offer investors the opportunity to stand in the shoes of the bank (ie same interest rate, same security position);
(b) In the unlikely event EIF were to default under the facility, then the PDS requires Equititrust to call a meeting of unit-holders (ie investors) to let them determine if they want a new manager appointed to replace Equititrust – ie it is up to the investors to decide what happens to the fund. It is not possible for Equititrust to simply freeze the fund as zencorp alleges;
(c) The fees referred to by zencorp as “exorbitant” show that he has either not even read the PDS or is being malicious in his comments. The management fee payable to Equititrust if all investors have received there benchmark return (it is described in this way due to ASIC requirements) is .15%. That equates to a maximum fee of $75,000 per annum if the fund is fully subscribed to $50m. There are no expiry fees or other fees as zencorp alleges. I am not sure any objective person would describe these fees as exorbitant.
(viii) Zencorp’s comments about valuations are ill-informed and without basis. If anybody seriously suggests that the property market in Australia has dropped 40% across the board over the past 12-18 months then they simply do not know what they are talking about (particularly when much work has been done by our Landsolve team during this time improving the values of security properties).
(ix) The comments regarding my integrity do not warrant comment other than to say that my integrity was never questioned as part of the MFS collapse (actually quite the contrary). It is simply not possible to defend one’s self against faceless and anonymous allegations (it seems akin to “parliamentary privilege”) but if zencorp would like to post the same comments disclosing his details I would be more than happy to address them in the appropriate manner.
The GFC and its lingering effects were unprecedented. Whilst Equititrust is not happy about freezing redemptions on its funds, the fact remains that this has been necessary to protect all investor’s interests. ING is the 7th largest corporation in the world yet it froze redemptions on several of its mortgage funds. Commonwealth Bank is one of the Top 20 rated banks in the world yet it froze redemptions on its own mortgage fund. We are proud that investor returns have been paid in full and on time throughout the GFC.
Over the past two years, Equititrust has reduced bank debt from $155m to $44m and anticipates having this fully extinguished in the next 6 months. We can then start the process of repaying investors who want there money back.
We are working assiduously to ensure investor’s rights and interests are protected and with a large investment of our own ($40m of which was voluntarily subordinated at the onset of the GFC) underpinning EIF we are showing that we are putting our money where our mouth is.
As always, if any genuine investor has any concerns about their investment they can contact us at Equititrust and we will do our best to address such concerns.
Regards
David Kennedy
Wonder who this could be ???
"We are also aware that certain parties are contacting Investors in the EPF, seeking to criticise the conduct of this investigation and these examinations, including suggestions that they may somehow disadvantage Investors"
http://www.equititrust.com.au/Pdfs/Liquidator/Liquidators Reports - 20170403 - Circular to Creditors.pdf
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