Equititrust
Interim Financial Report + Continuous Disclosure Statements
Several questions need to be raised as to why there was a delay by Equititrust in producing the Interim Financial Report – 31 December 2010.
It is interesting that both the Fund’s auditor and David Kennedy signed the report on 16 March 2011 but yet it took almost one month to make such report available to the Investors. The question is simply answered by reference to Current Assets (and in particular “Cash and cash equivalents”) found at page 7 of this report. At 31 December 2010 the Fund had only $301,433 available in cash – simple mathematics suggest approximately 3-4 weeks of wages and other costs associated with management of the Fund.
Or in other words, if the report was produced WHEN IT WAS PROMMISED to be, investors would have been made aware of the weak position of the fund. Nevertheless, David Kennedy CEO obviously didn’t want to have cachous on his hands, so he decided to not honour his word and delay the production of such report.
Moving forward, the Directors of Equititrust decided to postpone Investor Distributions (obviously because the EIF was out of cash and couldn’t pay) – it is not enough to say that “Oh, we want to revalue and restructure the fund” – the Fund either has the cash or it doesn’t.
Contemporaneously with making the financial report available Equititrust also decided to salt the wounds of the Investors by posting a Continuous Disclosure Statement noting the “EIF held cash funds in excess of $4m as at 8 April 2011 and has sufficient funds to meet its ongoing obligations for the foreseeable future” – Interesting, does Equititrust not see paying its investors their distributions an “Obligation” - or at the very least a “moral obligation”? Simply put, give us your money, but don’t worry, we don’t have any obligation to pay you your distribution – or in fact your money back at all. This is very comforting Equititrust, particularly in circumstances where paying the distributions to Investors was the only reason why we TRUSTED and SUPPORTED you during this trying time. This TRUST is GONE.
Anyway, it is interesting that on the Investor Distribution communication dated 4 April 2011 Equititrust stated that “the Equititrust Ltd Board has resolved to postpone all distributions (including the April distribution)” and then days later posts a Continuous Disclose Statement expressing the concept – Everything is ok, we have $4m in cash which we were meant to give to you as your distribution. We can now pay our wages and legal bills.
Class Action
Equitirust posted a further Continuous Disclosure Statement dated 15 April 2011 in an attempt to bandaid the pending class action. I make comment as follows:
Equititrust Noted:
Piper Alderman states that “It appears as though distributions have been suspended to enable an increase in debt repayments in the hope of appeasing the NAB and obtaining the Bank’s agreement to a restructure
of the EIF’s debt facility”. This statement is incorrect.
At no time has NAB asked for, or suggested, that distributions should be suspended. This decision was made by the Directors based upon events that have transpired over the past four weeks and was done so in order to be prudent whilst updated valuations of the underlying security for the EIF loan book are carried out. NAB was advised of the suspension as a matter of courtesy at the same time the announcement was made to unit-holders
Comment:
Interesting, particularly in circumstances where Equititrust’s own Communication dated 4 April 2011 expressly notes that one of the reasons why investor distributions have been delayed was to “accelerate repayment of our secured bank debt owed to the NAB”.
Equititrust
Piper Alderman states that “The NAB has not yet made a decision [with respect to the proposal for repayment of the facility]”. This statement is incorrect.
NAB has formally agreed to Equititrust’s proposal and this has been disclosed on the Equititrust Limited website. The Piper Alderman statement is also misleading in that it ignores the disclosure in the interim accounts that “The external financier [NAB] have indicated that they are broadly supportive of such proposal…”. The Directors felt it was prudent to disclose the ramifications for EIF if NAB did not agree to the revised proposal request notwithstanding that they were confident (based upon ongoing discussions with NAB) that such proposal would be accepted.
Comment
It is interesting that ALL of the disclosure Equititrust seeks to rely on was posted on its website 2-3 days ago AND the information that Piper Alderman relied upon was the ONLY information available given Equitrist’s failure to disclose when PROMOSIED. Furthermore, Equititrust uses the word “formally” when dealing with the NAB Facility BUT in the Continuous Disclosure Statement dated 13 April 2011 titled “Notification of NAB Facility” expressly states “Formal documentation of the extension is expected to be completed by 20 April 2011”. NO disclosure has been made in respect of that “formal” documentation and therefore NAB has not “formally” agreed to the extension. Nothing is formal Equititrust until it is documented and signed. David Tucker, Partner of law firm Tucker and Cowen OBVIOUSLY would have explained this to you. Notwithstanding, both Mark Mclivor and David Kennedy are/were Lawyers or have studied law. Please refrain from being misleading Equititrust – you are quickly loosing the support of investors.
Equititrust
Piper Alderman states that the meeting called for unit-holders for 20 April 2011 has been called in an “apparent attempt to further allay investor concerns”. The meeting has not been called to allay investor concerns but rather to address them. Equititrust recognizes that investors will be concerned at the suspension of distributions and the meetings are but one forum that Equititrust is using to address such concerns;
Comment
Rather hearsay Equititrust don’t you think? What is the material difference between “address” and “allay” investor concerns – seriously? It is obvious that the Investors have concerns and the intention of that meeting is to address/allay those concerns because ultimately you need to support of the investors.
Equititrust
Piper Alderman states that “One of the many issues likely to be raised by unit holders will be why the EIF’s difficult liquidity position has not prevented Equititrust withdrawing $4 million in management fees”. This statement is incorrect. Equititrust did not draw $4m in management fees for the six months ending 31 December 2010. The accounts quite clearly show that the management fee paid to Equititrust was less than $2.3m. Of this management fee, approximately $450,000 was used to pay legal costs, audit fees and other professional fees and charges for EIF that were quite legitimately able to be paid directly by EIF. Even if one ignores such reimbursable costs, the management fee was still not sufficient to cover the ongoing running costs of EIF which included wages, rent, IT costs, consultant’s fees etc.
The shortfall was paid by Equititrust Limited. It should be noted that Equititrust was entitled to claim such shortfall out of EIF but chose not to do so;
Comment
OK – point taken, but let’s look at this for a second: $2,144,754 Management Fee + $2,515,477 Return on Subordinate Investment = $4,660,231.
NOW this $450,000 of legal costs, audit fees and other professional fees and charges – HOW MUCH did you pay to TUCKER & COWEN????? For those who miss the link, David Tucker (Director of Equititrust) is a founding Partner of Tucker & Cowen. ALSO, you wouldn’t have to pay all these legal costs if you did your job correctly and vetted your Borrowers a little better. The last time I checked it wasn’t too difficult to check for Bankrupts!!! Surely this is part of your diligence.
Enjoy.
Ps. I have retained true copies of all of the supporting documentation below in instances where Equititrust decided to “update/change” them:
http://equititrust.com.au/Pdfs/EIF_Fin_statement_DEC_31_10.pdf
http://equititrust.com.au/Pdfs/Investor_distributions_April_2011.pdf
http://equititrust.com.au/Pdfs/NAB_Facility_Extension.pdf
http://equititrust.com.au/Pdfs/PIPER_ALDERMAN_CLASS_ACTION.pdf
Interim Financial Report + Continuous Disclosure Statements
Several questions need to be raised as to why there was a delay by Equititrust in producing the Interim Financial Report – 31 December 2010.
It is interesting that both the Fund’s auditor and David Kennedy signed the report on 16 March 2011 but yet it took almost one month to make such report available to the Investors. The question is simply answered by reference to Current Assets (and in particular “Cash and cash equivalents”) found at page 7 of this report. At 31 December 2010 the Fund had only $301,433 available in cash – simple mathematics suggest approximately 3-4 weeks of wages and other costs associated with management of the Fund.
Or in other words, if the report was produced WHEN IT WAS PROMMISED to be, investors would have been made aware of the weak position of the fund. Nevertheless, David Kennedy CEO obviously didn’t want to have cachous on his hands, so he decided to not honour his word and delay the production of such report.
Moving forward, the Directors of Equititrust decided to postpone Investor Distributions (obviously because the EIF was out of cash and couldn’t pay) – it is not enough to say that “Oh, we want to revalue and restructure the fund” – the Fund either has the cash or it doesn’t.
Contemporaneously with making the financial report available Equititrust also decided to salt the wounds of the Investors by posting a Continuous Disclosure Statement noting the “EIF held cash funds in excess of $4m as at 8 April 2011 and has sufficient funds to meet its ongoing obligations for the foreseeable future” – Interesting, does Equititrust not see paying its investors their distributions an “Obligation” - or at the very least a “moral obligation”? Simply put, give us your money, but don’t worry, we don’t have any obligation to pay you your distribution – or in fact your money back at all. This is very comforting Equititrust, particularly in circumstances where paying the distributions to Investors was the only reason why we TRUSTED and SUPPORTED you during this trying time. This TRUST is GONE.
Anyway, it is interesting that on the Investor Distribution communication dated 4 April 2011 Equititrust stated that “the Equititrust Ltd Board has resolved to postpone all distributions (including the April distribution)” and then days later posts a Continuous Disclose Statement expressing the concept – Everything is ok, we have $4m in cash which we were meant to give to you as your distribution. We can now pay our wages and legal bills.
Class Action
Equitirust posted a further Continuous Disclosure Statement dated 15 April 2011 in an attempt to bandaid the pending class action. I make comment as follows:
Equititrust Noted:
Piper Alderman states that “It appears as though distributions have been suspended to enable an increase in debt repayments in the hope of appeasing the NAB and obtaining the Bank’s agreement to a restructure
of the EIF’s debt facility”. This statement is incorrect.
At no time has NAB asked for, or suggested, that distributions should be suspended. This decision was made by the Directors based upon events that have transpired over the past four weeks and was done so in order to be prudent whilst updated valuations of the underlying security for the EIF loan book are carried out. NAB was advised of the suspension as a matter of courtesy at the same time the announcement was made to unit-holders
Comment:
Interesting, particularly in circumstances where Equititrust’s own Communication dated 4 April 2011 expressly notes that one of the reasons why investor distributions have been delayed was to “accelerate repayment of our secured bank debt owed to the NAB”.
Equititrust
Piper Alderman states that “The NAB has not yet made a decision [with respect to the proposal for repayment of the facility]”. This statement is incorrect.
NAB has formally agreed to Equititrust’s proposal and this has been disclosed on the Equititrust Limited website. The Piper Alderman statement is also misleading in that it ignores the disclosure in the interim accounts that “The external financier [NAB] have indicated that they are broadly supportive of such proposal…”. The Directors felt it was prudent to disclose the ramifications for EIF if NAB did not agree to the revised proposal request notwithstanding that they were confident (based upon ongoing discussions with NAB) that such proposal would be accepted.
Comment
It is interesting that ALL of the disclosure Equititrust seeks to rely on was posted on its website 2-3 days ago AND the information that Piper Alderman relied upon was the ONLY information available given Equitrist’s failure to disclose when PROMOSIED. Furthermore, Equititrust uses the word “formally” when dealing with the NAB Facility BUT in the Continuous Disclosure Statement dated 13 April 2011 titled “Notification of NAB Facility” expressly states “Formal documentation of the extension is expected to be completed by 20 April 2011”. NO disclosure has been made in respect of that “formal” documentation and therefore NAB has not “formally” agreed to the extension. Nothing is formal Equititrust until it is documented and signed. David Tucker, Partner of law firm Tucker and Cowen OBVIOUSLY would have explained this to you. Notwithstanding, both Mark Mclivor and David Kennedy are/were Lawyers or have studied law. Please refrain from being misleading Equititrust – you are quickly loosing the support of investors.
Equititrust
Piper Alderman states that the meeting called for unit-holders for 20 April 2011 has been called in an “apparent attempt to further allay investor concerns”. The meeting has not been called to allay investor concerns but rather to address them. Equititrust recognizes that investors will be concerned at the suspension of distributions and the meetings are but one forum that Equititrust is using to address such concerns;
Comment
Rather hearsay Equititrust don’t you think? What is the material difference between “address” and “allay” investor concerns – seriously? It is obvious that the Investors have concerns and the intention of that meeting is to address/allay those concerns because ultimately you need to support of the investors.
Equititrust
Piper Alderman states that “One of the many issues likely to be raised by unit holders will be why the EIF’s difficult liquidity position has not prevented Equititrust withdrawing $4 million in management fees”. This statement is incorrect. Equititrust did not draw $4m in management fees for the six months ending 31 December 2010. The accounts quite clearly show that the management fee paid to Equititrust was less than $2.3m. Of this management fee, approximately $450,000 was used to pay legal costs, audit fees and other professional fees and charges for EIF that were quite legitimately able to be paid directly by EIF. Even if one ignores such reimbursable costs, the management fee was still not sufficient to cover the ongoing running costs of EIF which included wages, rent, IT costs, consultant’s fees etc.
The shortfall was paid by Equititrust Limited. It should be noted that Equititrust was entitled to claim such shortfall out of EIF but chose not to do so;
Comment
OK – point taken, but let’s look at this for a second: $2,144,754 Management Fee + $2,515,477 Return on Subordinate Investment = $4,660,231.
NOW this $450,000 of legal costs, audit fees and other professional fees and charges – HOW MUCH did you pay to TUCKER & COWEN????? For those who miss the link, David Tucker (Director of Equititrust) is a founding Partner of Tucker & Cowen. ALSO, you wouldn’t have to pay all these legal costs if you did your job correctly and vetted your Borrowers a little better. The last time I checked it wasn’t too difficult to check for Bankrupts!!! Surely this is part of your diligence.
Enjoy.
Ps. I have retained true copies of all of the supporting documentation below in instances where Equititrust decided to “update/change” them:
http://equititrust.com.au/Pdfs/EIF_Fin_statement_DEC_31_10.pdf
http://equititrust.com.au/Pdfs/Investor_distributions_April_2011.pdf
http://equititrust.com.au/Pdfs/NAB_Facility_Extension.pdf
http://equititrust.com.au/Pdfs/PIPER_ALDERMAN_CLASS_ACTION.pdf
