Regarding Kostag's post: much of this post is based on incorrect assumptions. Comments in blue:
Equititrust?
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Re: EquitiTrust: detailed replies
A very detailed analysis by OLMAN - who clearly has a pretty good line to good info from Equititrust - a few quick questions then and I guess we just sit it out and keep our fingers crossed that the detailed analysis is correct:-
Take a look at the 30th June 2010 on www.equititrust.com.au
My very quick and ill-informed (perhaps) reading raises some issues:-
a) of some $255,338,826 of mortgage loans , some $163,088,936 are listed as 'static'. I presume that 'static' means ' do not pay interest'. I cannot find a definition of 'statis'. Does that mean we have $92,249,890 of loans that do pay interest?
"Static" does not mean "does not pay interest".
1) A "Construction and Development" loan is one where there is ongoing construction, or development which enhances the value of the underlying security (mostly civil works such as roads, drainage, sewerage etc).
2) "Static" loans are for finished stock or vacant land.
INTEREST BEARING IS ONE THING - ISSUE HERE IS, ARE THEY INTEREST EARNING I.E: IS INTEREST BEING PAID 3) All loans are interest bearing.
iii) interest on the $25million facility with Bank of Scotalnd,
I DON'T UNDERSTAND THE WHOLE EPF AND EIF THING - MAYBE I DON'T NEED TO KNOW - BUT DOES THAT MEAN THAT SOME OF OUR EQUITY OR ASSETS ARE MOVED INTO EPF RATHER THAN EIF? I DONT KNOW WHETHER THIS IS GOOD OR BAD - SO I CANNOT COMMENT ON WHAT I DONT UNDERSTAND. I GUESS MY ONLY COMMENT IS THAT I CANT SEE WHY IT IS NOT ALL IN ONE POT. As per my post of 23 November, "the Bank of Scotland loan ......... is a loan within the Equititust Premium Fund (EPF) and does not apply to the Equititrust Income Fund (EIF)".
and finally iv) if last year and 2008 are anything to go on, over $14million to Equititrust Ltd.
ALL OF THIS IS NO DOUBT LEGALLY CORRECT - BUT ISN'T THE ISSUE THIS - THAT INVESTORS ARE NOT HAVING THEIR CAPITAL REDEEMED AND SO MUCH MILEAGE IS MADE OF THE CAPITAL WARRANTY ETC - NOW, I DONT HAVE A CAHS FLOW ANALYSIS AND I HAVE ASKED THE QUESTION ABOVE ABOUT INTEREST ACCRUED WHICH IS ONE THING AND INTEREST PAID WHICH IS ANOTHER - BUT IF THE EIF IS SHORT OF FUNDS - WHICH SEEMS TO BE THE CASE - A $14m RETURN PER ANNUM ON WHAT I ASSUME IS A CASH INVESTMENT (NOT SOME BOOK EQUITY) OF $40m IS NOT BAD GOING WHEN THERE ARE $40-$50m OF US WIATING TO GET OUR MONEY BACK. NOW, WHOEVER HAS ACCESS TOI A CASH FUNDS STATEMENT (mAYBE OLMAN CAN GET THIS) CAN THEY ASSURE US THAT THE RETURN TO EQUITITRUST AND ALL OTHER OPERATING COSTS ARE PAID OUT OF INCOME EARNDED IN CASH NOT FUNDED BY RETURN OF CAPITAL AND OR FURTHER BORROWINGS? THAT WOULD SEEM TO ME TO BE THE UNANSWERED CONCERN. The $14m was the Return on the Responsible Entity's Subordinated Units (RSI) as described on p4 of the 09/10 Financial Report. The order of priority of payments (on the same page) show that these funds can only be paid if there is any surplus after actual expenses of the EIF, distributions to members, and management fees, are paid. IT SEEMS TO HAVE BENE THE SAME AMOUNT EACH YEAR FOR 3 YEARS Obviously this sum varies according to the financial circumstances in any one year, and is itself subject to the solvency of the EIF. If there is no money left after expenses, distributions and management fees, there is no return. Again, as stated in my post of 23 November, "these funds for the past 3 years have been largely applied to impaired loans. There are no compensatory arrangements or fees payable to Equititrust for this facility, and they do not regain the funds foregone". AGREE THAT LEGALLY WE MAY ALL BE OVER A BARREL - BUT WHAT IS THE WARRANTY ABOUT AND 'PUTTING OUR MONEY WHERE OUR MOUTH IS' - THE MONEY TO REPAY US IS NOT THERE BECAUSE LOANS HAVE GONE BAD - SO WHY WOULD ANY MANAGER BE REWARDED UNTIL WE CORE INVESTORS ARE REPAID Equititrust Ltd could have legally taken these funds for their own use and left the impairments to erode the value of the subordinated investment and investors' funds. YOU MIGHT SAY IT - I'D SAY IT IS THE LEAST THAT ANY HONEST MANAGER WOULD DO AND SHOULD BE LEGALLY OBLIGATED TO DO It has to be said that Equititrust's application of the RSI to impairments is a demonstrable act of good faith.
The Financial Report clearly shows on p8 under Liabilities that there is around $39m total liabilities at 30 June 2010, which includes the $35m NAB loan which is scheduled to be completely repaid by 01 Sept 2011. WELL DBET FREE OTHER THAN FOR THE FACT THAT INVESTORS ARE STILL OWED HUNDREDS OF MILLIONS Thereafter, the EIF is substantially debt free.
b) 1. DO MORTGAGEE PROPERTIES PAY INTEREST? I ASSUME NOT Loan categorised as 'mortgagee in possession' suddenly account for $71,247,884 or a staggering 28% of the overall loan book of $255,338,826. Is this normal? I can only assume that for a property to be mortgagee in possession, that would mean that the original borrower and property owner, could not generate sufficent sales or cash flow from the property to meet obligations or repay the loan, or worse, get anyone else to take over the loan. That being the case, surely, there must be some high level of anticpated impairment. The level of LVR reported on note 10 (c) (ii) on page 25 in the range 41% (I'd be looking at why the Borrower could not repay if that LVR was/is correct!) upt to 77%, seem to be based in the main on valuations done in 2009, at least a year out of date and presumably since then there has bene further decline generally in line with the state of the real estate markets.
1) AGREED NO QUESTION ON THIS Property financing has been through much turmoil in the past few years, and it is no surprise that Equititrust has had to take action to manage defaults. According to the CEO: "Most of the increase of the (Mortgagee in Possession) statistic comes from us taking possession of the Wirrina Cove Resort Development in South Australia. WHAT IS THE EIF COMPONENT MEAN? DOES THAT MEAN THAT EPF ALSO CLAIMS INTEREST IN OUR ASSETS - JUST DON'T UNDERSTAND THIS PART - IF THERE IS A $77m VALUATION ON AN ASSET WHERE WE ARE OWED ONLY $32m , I AM GREATLY COMFORTED - BUT IF EIF AND EPF ARE BETWEEN THEM OWED SOME OTHER FIGURE ON THIS ONE FOR EXAMPLE - THEN LETS KNOW THE TRUE DISCLOSED DEBT TO LOAN RATION... RATHER THAN GETTING A PART ANSWER WHICH ON ITS FACE SEEMS A VERY COMFORTING ANSWER The EIF loan component on this loan as at 30 June was circa $32m and the valuation performed in Sept 2008 (some 1.75 years prior and well into the GFC) was for $77m. Whilst it is likely the property has dropped further (maybe 10-15%) there is ample coverage of our debt and we are now selling the various components of the resort and expect full repayment (along with a healthy amount of default interest)".
2) AGREED THAT COULD EXPLAIN IF A PROPERTY HAS TOO MANY LOANS ON IT WHY THE BORROWER COULD NOT DO ANYTHIGN TO RE-FINANCE - AGREE OLMAN. Comments on borrowers' abilities to refinance don't acknowledge the fact that many of these developments have additional financiers ranking behind Equititrust. The LVR's in the Financial Report are solely attributable to Equititrust's financing arrangements. The borrowers' LVR's may have to take into account further financing (in addition to borrowings from Equititrust), which would have some bearing on whether they are able to refinance on their own account.
3) WHEN PROPERTY VALUES HAVE CLEARLY COLLAPSED OVER LAST 3 YEARS - THE USE OF 3 YEAR OLD VALUATIONS WOULD BE QUITE INAPPROPRIATE - OUR ONLY ASSET IS THE VALUE OF THE PROPERTIES. I SPOKE TO ONE LEADING VALUATION FIRM AND THEY SAID THAT A LARGE BULK VALUATION SUBJECT TO GEOGRAPHIC CONSTRAINTS COULD BE DONE AT $1 PER $1,000. SO IN YOUR $70M EXAMPLE - A COST OF $70,000. ASSUME THE WHOLE LOAN REGISTER IS $300m - $300,000 COST WHICH COMPARED TO $14M BEING TROUSERED BY EQUITITRUST SEEMS TO BE A SMALL COST FOR SUCH RE-ASSURANCE, COMFORT AND CERTAINITY - EVEN IF IT IS DOUBLE THAT COST - MAKE IT $600,000 - IN ANY EVENT, WE WOULD NOT NEED ALL LOANS DONE - PRESUMABLY THERE ARE SOME LOANS WITH VALUATIONS IN THE LAST 12 MONTHS OR SO - I DONT THINK THAT COST SAVING IS A RELEVANT EXCUSE FOR FAILURE TO HAVE CURRENT VALUED ASSETS Valuations by Equititrust are done every 3 years to minimise the significant costs of getting them done. Additional valuations are done when considered necessary, such as when selling an asset. Equititrust say that they "continue to monitor security value by looking at comparable sales, performing internal valuations and feasibilities and obtaining real estate agent’s submissions on an ongoing basis". NO - AN INDEPENDENT VALUATION IS JUST THAT 'INDEPENDENT' ...... INTERNAL SELF SERVING ANALYSIS IS NOT A LOGICAL PRACTICE AND IN ANY EVENT THE NATIONAL BANK LOAN HAS A CAP OF 24% ON IT - SO PRESUMABLY THEY DID SOME EXTERNAL APPRAISAL - IF THEY DID, WHAT WAS THEIR APPRAISAL? TO GO AS LOW AS 24% SETS OFF A WARNING BELL WITH ME THAT MAYBE THEY TOOK A JAUNDICED VIEW OF THE VALUES USED IN THE LOAN BOOK. LETS GET THEIR FIGURE? OF WHAT ETSTING AND VERIFICATION DID KPMG DO AS PART OF THEIR AUDIT? OR DID THEY SIMPLY IGNORE THE VALUES OF THE GROSS ASSETS? This seems a logical practice.
These are troubling disclosures. Sadly, KPMG, as auditor, does not address the issue of going concern and ability to survive.
NO MAGIC WAND - IT NEEDS DISCLOSURE OF A SIMPLE CASH FLOW ANALYSIS FOR LAST YEAR AND A LIKLEY CASH FLOW ANALYSIS FOR 2011 - THEN WE CAN ALL FORM A VIEW BASED ON FACTS - It would be nice to have someone wave a magic wand and dissipate all of the uncertainties of the times, but in the face of reality note 3(i) on pp 14 and 15 of the Financial Report will have to suffice. Here the auditor outlines the issues and conclusions about the "Going Concern".
A very detailed analysis by OLMAN - who clearly has a pretty good line to good info from Equititrust - a few quick questions then and I guess we just sit it out and keep our fingers crossed that the detailed analysis is correct:-
Take a look at the 30th June 2010 on www.equititrust.com.au
My very quick and ill-informed (perhaps) reading raises some issues:-
a) of some $255,338,826 of mortgage loans , some $163,088,936 are listed as 'static'. I presume that 'static' means ' do not pay interest'. I cannot find a definition of 'statis'. Does that mean we have $92,249,890 of loans that do pay interest?
"Static" does not mean "does not pay interest".
1) A "Construction and Development" loan is one where there is ongoing construction, or development which enhances the value of the underlying security (mostly civil works such as roads, drainage, sewerage etc).
2) "Static" loans are for finished stock or vacant land.
INTEREST BEARING IS ONE THING - ISSUE HERE IS, ARE THEY INTEREST EARNING I.E: IS INTEREST BEING PAID 3) All loans are interest bearing.
iii) interest on the $25million facility with Bank of Scotalnd,
I DON'T UNDERSTAND THE WHOLE EPF AND EIF THING - MAYBE I DON'T NEED TO KNOW - BUT DOES THAT MEAN THAT SOME OF OUR EQUITY OR ASSETS ARE MOVED INTO EPF RATHER THAN EIF? I DONT KNOW WHETHER THIS IS GOOD OR BAD - SO I CANNOT COMMENT ON WHAT I DONT UNDERSTAND. I GUESS MY ONLY COMMENT IS THAT I CANT SEE WHY IT IS NOT ALL IN ONE POT. As per my post of 23 November, "the Bank of Scotland loan ......... is a loan within the Equititust Premium Fund (EPF) and does not apply to the Equititrust Income Fund (EIF)".
and finally iv) if last year and 2008 are anything to go on, over $14million to Equititrust Ltd.
ALL OF THIS IS NO DOUBT LEGALLY CORRECT - BUT ISN'T THE ISSUE THIS - THAT INVESTORS ARE NOT HAVING THEIR CAPITAL REDEEMED AND SO MUCH MILEAGE IS MADE OF THE CAPITAL WARRANTY ETC - NOW, I DONT HAVE A CAHS FLOW ANALYSIS AND I HAVE ASKED THE QUESTION ABOVE ABOUT INTEREST ACCRUED WHICH IS ONE THING AND INTEREST PAID WHICH IS ANOTHER - BUT IF THE EIF IS SHORT OF FUNDS - WHICH SEEMS TO BE THE CASE - A $14m RETURN PER ANNUM ON WHAT I ASSUME IS A CASH INVESTMENT (NOT SOME BOOK EQUITY) OF $40m IS NOT BAD GOING WHEN THERE ARE $40-$50m OF US WIATING TO GET OUR MONEY BACK. NOW, WHOEVER HAS ACCESS TOI A CASH FUNDS STATEMENT (mAYBE OLMAN CAN GET THIS) CAN THEY ASSURE US THAT THE RETURN TO EQUITITRUST AND ALL OTHER OPERATING COSTS ARE PAID OUT OF INCOME EARNDED IN CASH NOT FUNDED BY RETURN OF CAPITAL AND OR FURTHER BORROWINGS? THAT WOULD SEEM TO ME TO BE THE UNANSWERED CONCERN. The $14m was the Return on the Responsible Entity's Subordinated Units (RSI) as described on p4 of the 09/10 Financial Report. The order of priority of payments (on the same page) show that these funds can only be paid if there is any surplus after actual expenses of the EIF, distributions to members, and management fees, are paid. IT SEEMS TO HAVE BENE THE SAME AMOUNT EACH YEAR FOR 3 YEARS Obviously this sum varies according to the financial circumstances in any one year, and is itself subject to the solvency of the EIF. If there is no money left after expenses, distributions and management fees, there is no return. Again, as stated in my post of 23 November, "these funds for the past 3 years have been largely applied to impaired loans. There are no compensatory arrangements or fees payable to Equititrust for this facility, and they do not regain the funds foregone". AGREE THAT LEGALLY WE MAY ALL BE OVER A BARREL - BUT WHAT IS THE WARRANTY ABOUT AND 'PUTTING OUR MONEY WHERE OUR MOUTH IS' - THE MONEY TO REPAY US IS NOT THERE BECAUSE LOANS HAVE GONE BAD - SO WHY WOULD ANY MANAGER BE REWARDED UNTIL WE CORE INVESTORS ARE REPAID Equititrust Ltd could have legally taken these funds for their own use and left the impairments to erode the value of the subordinated investment and investors' funds. YOU MIGHT SAY IT - I'D SAY IT IS THE LEAST THAT ANY HONEST MANAGER WOULD DO AND SHOULD BE LEGALLY OBLIGATED TO DO It has to be said that Equititrust's application of the RSI to impairments is a demonstrable act of good faith.
The Financial Report clearly shows on p8 under Liabilities that there is around $39m total liabilities at 30 June 2010, which includes the $35m NAB loan which is scheduled to be completely repaid by 01 Sept 2011. WELL DBET FREE OTHER THAN FOR THE FACT THAT INVESTORS ARE STILL OWED HUNDREDS OF MILLIONS Thereafter, the EIF is substantially debt free.
b) 1. DO MORTGAGEE PROPERTIES PAY INTEREST? I ASSUME NOT Loan categorised as 'mortgagee in possession' suddenly account for $71,247,884 or a staggering 28% of the overall loan book of $255,338,826. Is this normal? I can only assume that for a property to be mortgagee in possession, that would mean that the original borrower and property owner, could not generate sufficent sales or cash flow from the property to meet obligations or repay the loan, or worse, get anyone else to take over the loan. That being the case, surely, there must be some high level of anticpated impairment. The level of LVR reported on note 10 (c) (ii) on page 25 in the range 41% (I'd be looking at why the Borrower could not repay if that LVR was/is correct!) upt to 77%, seem to be based in the main on valuations done in 2009, at least a year out of date and presumably since then there has bene further decline generally in line with the state of the real estate markets.
1) AGREED NO QUESTION ON THIS Property financing has been through much turmoil in the past few years, and it is no surprise that Equititrust has had to take action to manage defaults. According to the CEO: "Most of the increase of the (Mortgagee in Possession) statistic comes from us taking possession of the Wirrina Cove Resort Development in South Australia. WHAT IS THE EIF COMPONENT MEAN? DOES THAT MEAN THAT EPF ALSO CLAIMS INTEREST IN OUR ASSETS - JUST DON'T UNDERSTAND THIS PART - IF THERE IS A $77m VALUATION ON AN ASSET WHERE WE ARE OWED ONLY $32m , I AM GREATLY COMFORTED - BUT IF EIF AND EPF ARE BETWEEN THEM OWED SOME OTHER FIGURE ON THIS ONE FOR EXAMPLE - THEN LETS KNOW THE TRUE DISCLOSED DEBT TO LOAN RATION... RATHER THAN GETTING A PART ANSWER WHICH ON ITS FACE SEEMS A VERY COMFORTING ANSWER The EIF loan component on this loan as at 30 June was circa $32m and the valuation performed in Sept 2008 (some 1.75 years prior and well into the GFC) was for $77m. Whilst it is likely the property has dropped further (maybe 10-15%) there is ample coverage of our debt and we are now selling the various components of the resort and expect full repayment (along with a healthy amount of default interest)".
2) AGREED THAT COULD EXPLAIN IF A PROPERTY HAS TOO MANY LOANS ON IT WHY THE BORROWER COULD NOT DO ANYTHIGN TO RE-FINANCE - AGREE OLMAN. Comments on borrowers' abilities to refinance don't acknowledge the fact that many of these developments have additional financiers ranking behind Equititrust. The LVR's in the Financial Report are solely attributable to Equititrust's financing arrangements. The borrowers' LVR's may have to take into account further financing (in addition to borrowings from Equititrust), which would have some bearing on whether they are able to refinance on their own account.
3) WHEN PROPERTY VALUES HAVE CLEARLY COLLAPSED OVER LAST 3 YEARS - THE USE OF 3 YEAR OLD VALUATIONS WOULD BE QUITE INAPPROPRIATE - OUR ONLY ASSET IS THE VALUE OF THE PROPERTIES. I SPOKE TO ONE LEADING VALUATION FIRM AND THEY SAID THAT A LARGE BULK VALUATION SUBJECT TO GEOGRAPHIC CONSTRAINTS COULD BE DONE AT $1 PER $1,000. SO IN YOUR $70M EXAMPLE - A COST OF $70,000. ASSUME THE WHOLE LOAN REGISTER IS $300m - $300,000 COST WHICH COMPARED TO $14M BEING TROUSERED BY EQUITITRUST SEEMS TO BE A SMALL COST FOR SUCH RE-ASSURANCE, COMFORT AND CERTAINITY - EVEN IF IT IS DOUBLE THAT COST - MAKE IT $600,000 - IN ANY EVENT, WE WOULD NOT NEED ALL LOANS DONE - PRESUMABLY THERE ARE SOME LOANS WITH VALUATIONS IN THE LAST 12 MONTHS OR SO - I DONT THINK THAT COST SAVING IS A RELEVANT EXCUSE FOR FAILURE TO HAVE CURRENT VALUED ASSETS Valuations by Equititrust are done every 3 years to minimise the significant costs of getting them done. Additional valuations are done when considered necessary, such as when selling an asset. Equititrust say that they "continue to monitor security value by looking at comparable sales, performing internal valuations and feasibilities and obtaining real estate agent’s submissions on an ongoing basis". NO - AN INDEPENDENT VALUATION IS JUST THAT 'INDEPENDENT' ...... INTERNAL SELF SERVING ANALYSIS IS NOT A LOGICAL PRACTICE AND IN ANY EVENT THE NATIONAL BANK LOAN HAS A CAP OF 24% ON IT - SO PRESUMABLY THEY DID SOME EXTERNAL APPRAISAL - IF THEY DID, WHAT WAS THEIR APPRAISAL? TO GO AS LOW AS 24% SETS OFF A WARNING BELL WITH ME THAT MAYBE THEY TOOK A JAUNDICED VIEW OF THE VALUES USED IN THE LOAN BOOK. LETS GET THEIR FIGURE? OF WHAT ETSTING AND VERIFICATION DID KPMG DO AS PART OF THEIR AUDIT? OR DID THEY SIMPLY IGNORE THE VALUES OF THE GROSS ASSETS? This seems a logical practice.
These are troubling disclosures. Sadly, KPMG, as auditor, does not address the issue of going concern and ability to survive.
NO MAGIC WAND - IT NEEDS DISCLOSURE OF A SIMPLE CASH FLOW ANALYSIS FOR LAST YEAR AND A LIKLEY CASH FLOW ANALYSIS FOR 2011 - THEN WE CAN ALL FORM A VIEW BASED ON FACTS - It would be nice to have someone wave a magic wand and dissipate all of the uncertainties of the times, but in the face of reality note 3(i) on pp 14 and 15 of the Financial Report will have to suffice. Here the auditor outlines the issues and conclusions about the "Going Concern".
In reply to Kostag:
(note abbreviations: Equititrust = EQT; Return on Subordinated Investment = RSI; Equititrust Income Fund = EIF, and Equititrust Premium Fund = EPF).
Not sure how this post will appear – it was too long and had to be split in two. This is the first part:
1) INTEREST BEARING IS ONE THING - ISSUE HERE IS, ARE THEY INTEREST EARNING I.E: IS INTEREST BEING PAID
Here is what the CEO has said about interest:
The fact that interest is capitalised does not mean we don’t get paid it – simply that we get it in one lump sum at the end of the loan (or upon sale of the security property). For example on the Raptis loan (of circa $50m) we were repaid $10-$15m in interest last financial year (including default interest of circa $2.5m). We were well secured and passed about $10m odd worth of security to the 2nd mortgagee who ranked after us;
2) I DON'T UNDERSTAND THE WHOLE EPF AND EIF THING - MAYBE I DON'T NEED TO KNOW - BUT DOES THAT MEAN THAT SOME OF OUR EQUITY OR ASSETS ARE MOVED INTO EPF RATHER THAN EIF? I DONT KNOW WHETHER THIS IS GOOD OR BAD - SO I CANNOT COMMENT ON WHAT I DONT UNDERSTAND. I GUESS MY ONLY COMMENT IS THAT I CANT SEE WHY IT IS NOT ALL IN ONE POT.
The distinction between the EPF and EIF is evident on the web site. At the bottom of the Home Page under the "Navigation" heading, and in the "Invest" pages, is this:
Equititrust Premium Fund
The Equititrust Premium Fund was established in 2003 for a select group of our valued clients; for investors seeking the opportunity for premium rates backed by Equititrust’s own capital protection investment of $10 million and proven management expertise. This Fund is exclusive for wholesale investors.
Benchmark Rates | Download the Information Memorandum
The “Information Memorandum” states that the EPF is for wholesale investors only, with a stringent definition of the term "wholesale investor". The financing arrangements are generally riskier than for the EIF, balanced of course by the possibility of better returns than those of the EIF.
Because the structure and rules of the EPF are different to those of the EIF, lumping them all in one as you suggest is not practical, certainly not usual industry practice, and would have to be illegal. The EPF and the EIF are seperate entities, with no cross-sharing of assets or liabilities, although they may be investors in the same projects on an independent basis.
3) ALL OF THIS IS NO DOUBT LEGALLY CORRECT - BUT ISN'T THE ISSUE THIS - THAT INVESTORS ARE NOT HAVING THEIR CAPITAL REDEEMED AND SO MUCH MILEAGE IS MADE OF THE CAPITAL WARRANTY ETC - NOW, I DONT HAVE A CAHS FLOW ANALYSIS AND I HAVE ASKED THE QUESTION ABOVE ABOUT INTEREST ACCRUED WHICH IS ONE THING AND INTEREST PAID WHICH IS ANOTHER - BUT IF THE EIF IS SHORT OF FUNDS - WHICH SEEMS TO BE THE CASE - A $14m RETURN PER ANNUM ON WHAT I ASSUME IS A CASH INVESTMENT (NOT SOME BOOK EQUITY) OF $40m IS NOT BAD GOING WHEN THERE ARE $40-$50m OF US WIATING TO GET OUR MONEY BACK. NOW, WHOEVER HAS ACCESS TOI A CASH FUNDS STATEMENT (mAYBE OLMAN CAN GET THIS) CAN THEY ASSURE US THAT THE RETURN TO EQUITITRUST AND ALL OTHER OPERATING COSTS ARE PAID OUT OF INCOME EARNDED IN CASH NOT FUNDED BY RETURN OF CAPITAL AND OR FURTHER BORROWINGS? THAT WOULD SEEM TO ME TO BE THE UNANSWERED CONCERN.
At present, investors' funds are all accounted for and tied up in the loans of the EIF. Liquidity is the problem. The recall of bank financing has thrown a spanner into the works and put the screws further on liquidity.
The bank borrowings produced income above what was necessary to repay interest and charges (that's why borrowing is done - to make money). The depletion of borrowings means there will be less profit in future, with the fund relying on profits from earnings on investors' funds alone. The planned capital raising is designed to provide additional capital to replace the bank finance and improve the profit margins. Until then, there are only investors' funds at work.
The $14m return you refer to is misleading. As stated in previous posts, the figure was actually $15m for FY09/10 and comprised of $10.5m RSI and $4.5m expenses of the scheme on an actual basis. Since the RSI was applied to loan impairments, the per annum return to EQT was nil, same as the year before and the year before that.
$30m of the RSI over the past 3 years was applied to impaired loans, to shore up the value of investors' funds. While the RSI is a cash value, if these funds were paid out in redemptions, the value of the fund to the remaining investors would have been diminished by the value of impairments. EQT is obviously considering the interests of all investors by acting as they have. All those who have requested redemption are affected by this, but the rationale employed makes sense when considering the welfare of all investors as a whole. The capital guarantee of $40m remains intact and unmolested to date, as mentioned previously.
There is a Statement of Cash Flows on p10 of the 09/10 Financial Report. If you want further details, I suggest you ask EQT for it. I respond to your posts because I feel some of the issues you raise have broad interest, and the necessary research and analysis helps me personally to come to grips with what is going on. However, I don't personally need further cash analysis and I'm not inclined to do your research for you.
4) IT (the RSI) SEEMS TO HAVE BENE THE SAME AMOUNT EACH YEAR FOR 3 YEARS
FY08: 21.1m. FY09: 9.9m. FY10: 10.5m. It is not the same amount each year. Over the three years, $30m went to impaired loans, with the remainder to fund operating costs not covered by the management fee.
5) AGREE THAT LEGALLY WE MAY ALL BE OVER A BARREL - BUT WHAT IS THE WARRANTY ABOUT AND 'PUTTING OUR MONEY WHERE OUR MOUTH IS' - THE MONEY TO REPAY US IS NOT THERE BECAUSE LOANS HAVE GONE BAD - SO WHY WOULD ANY MANAGER BE REWARDED UNTIL WE CORE INVESTORS ARE REPAID
As stated previously, the warranty is still intact. The manager has not been rewarded for 3 years now, precisely because they have allocated the RSI to impairments and fund costs, as previously described.
6) YOU MIGHT SAY IT - I'D SAY IT IS THE LEAST THAT ANY HONEST MANAGER WOULD DO AND SHOULD BE LEGALLY OBLIGATED TO DO
I haven't seen any other collapsed funds do anything like this. While maybe they should be legally obligated to do so, this is a personal opinion and you'd have to take this issue up with the law makers - it has no bearing on EQT and their actions.
.... (continued in 2nd part).....
(note abbreviations: Equititrust = EQT; Return on Subordinated Investment = RSI; Equititrust Income Fund = EIF, and Equititrust Premium Fund = EPF).
Not sure how this post will appear – it was too long and had to be split in two. This is the first part:
1) INTEREST BEARING IS ONE THING - ISSUE HERE IS, ARE THEY INTEREST EARNING I.E: IS INTEREST BEING PAID
Here is what the CEO has said about interest:
The fact that interest is capitalised does not mean we don’t get paid it – simply that we get it in one lump sum at the end of the loan (or upon sale of the security property). For example on the Raptis loan (of circa $50m) we were repaid $10-$15m in interest last financial year (including default interest of circa $2.5m). We were well secured and passed about $10m odd worth of security to the 2nd mortgagee who ranked after us;
2) I DON'T UNDERSTAND THE WHOLE EPF AND EIF THING - MAYBE I DON'T NEED TO KNOW - BUT DOES THAT MEAN THAT SOME OF OUR EQUITY OR ASSETS ARE MOVED INTO EPF RATHER THAN EIF? I DONT KNOW WHETHER THIS IS GOOD OR BAD - SO I CANNOT COMMENT ON WHAT I DONT UNDERSTAND. I GUESS MY ONLY COMMENT IS THAT I CANT SEE WHY IT IS NOT ALL IN ONE POT.
The distinction between the EPF and EIF is evident on the web site. At the bottom of the Home Page under the "Navigation" heading, and in the "Invest" pages, is this:
Equititrust Premium Fund
The Equititrust Premium Fund was established in 2003 for a select group of our valued clients; for investors seeking the opportunity for premium rates backed by Equititrust’s own capital protection investment of $10 million and proven management expertise. This Fund is exclusive for wholesale investors.
Benchmark Rates | Download the Information Memorandum
The “Information Memorandum” states that the EPF is for wholesale investors only, with a stringent definition of the term "wholesale investor". The financing arrangements are generally riskier than for the EIF, balanced of course by the possibility of better returns than those of the EIF.
Because the structure and rules of the EPF are different to those of the EIF, lumping them all in one as you suggest is not practical, certainly not usual industry practice, and would have to be illegal. The EPF and the EIF are seperate entities, with no cross-sharing of assets or liabilities, although they may be investors in the same projects on an independent basis.
3) ALL OF THIS IS NO DOUBT LEGALLY CORRECT - BUT ISN'T THE ISSUE THIS - THAT INVESTORS ARE NOT HAVING THEIR CAPITAL REDEEMED AND SO MUCH MILEAGE IS MADE OF THE CAPITAL WARRANTY ETC - NOW, I DONT HAVE A CAHS FLOW ANALYSIS AND I HAVE ASKED THE QUESTION ABOVE ABOUT INTEREST ACCRUED WHICH IS ONE THING AND INTEREST PAID WHICH IS ANOTHER - BUT IF THE EIF IS SHORT OF FUNDS - WHICH SEEMS TO BE THE CASE - A $14m RETURN PER ANNUM ON WHAT I ASSUME IS A CASH INVESTMENT (NOT SOME BOOK EQUITY) OF $40m IS NOT BAD GOING WHEN THERE ARE $40-$50m OF US WIATING TO GET OUR MONEY BACK. NOW, WHOEVER HAS ACCESS TOI A CASH FUNDS STATEMENT (mAYBE OLMAN CAN GET THIS) CAN THEY ASSURE US THAT THE RETURN TO EQUITITRUST AND ALL OTHER OPERATING COSTS ARE PAID OUT OF INCOME EARNDED IN CASH NOT FUNDED BY RETURN OF CAPITAL AND OR FURTHER BORROWINGS? THAT WOULD SEEM TO ME TO BE THE UNANSWERED CONCERN.
At present, investors' funds are all accounted for and tied up in the loans of the EIF. Liquidity is the problem. The recall of bank financing has thrown a spanner into the works and put the screws further on liquidity.
The bank borrowings produced income above what was necessary to repay interest and charges (that's why borrowing is done - to make money). The depletion of borrowings means there will be less profit in future, with the fund relying on profits from earnings on investors' funds alone. The planned capital raising is designed to provide additional capital to replace the bank finance and improve the profit margins. Until then, there are only investors' funds at work.
The $14m return you refer to is misleading. As stated in previous posts, the figure was actually $15m for FY09/10 and comprised of $10.5m RSI and $4.5m expenses of the scheme on an actual basis. Since the RSI was applied to loan impairments, the per annum return to EQT was nil, same as the year before and the year before that.
$30m of the RSI over the past 3 years was applied to impaired loans, to shore up the value of investors' funds. While the RSI is a cash value, if these funds were paid out in redemptions, the value of the fund to the remaining investors would have been diminished by the value of impairments. EQT is obviously considering the interests of all investors by acting as they have. All those who have requested redemption are affected by this, but the rationale employed makes sense when considering the welfare of all investors as a whole. The capital guarantee of $40m remains intact and unmolested to date, as mentioned previously.
There is a Statement of Cash Flows on p10 of the 09/10 Financial Report. If you want further details, I suggest you ask EQT for it. I respond to your posts because I feel some of the issues you raise have broad interest, and the necessary research and analysis helps me personally to come to grips with what is going on. However, I don't personally need further cash analysis and I'm not inclined to do your research for you.
4) IT (the RSI) SEEMS TO HAVE BENE THE SAME AMOUNT EACH YEAR FOR 3 YEARS
FY08: 21.1m. FY09: 9.9m. FY10: 10.5m. It is not the same amount each year. Over the three years, $30m went to impaired loans, with the remainder to fund operating costs not covered by the management fee.
5) AGREE THAT LEGALLY WE MAY ALL BE OVER A BARREL - BUT WHAT IS THE WARRANTY ABOUT AND 'PUTTING OUR MONEY WHERE OUR MOUTH IS' - THE MONEY TO REPAY US IS NOT THERE BECAUSE LOANS HAVE GONE BAD - SO WHY WOULD ANY MANAGER BE REWARDED UNTIL WE CORE INVESTORS ARE REPAID
As stated previously, the warranty is still intact. The manager has not been rewarded for 3 years now, precisely because they have allocated the RSI to impairments and fund costs, as previously described.
6) YOU MIGHT SAY IT - I'D SAY IT IS THE LEAST THAT ANY HONEST MANAGER WOULD DO AND SHOULD BE LEGALLY OBLIGATED TO DO
I haven't seen any other collapsed funds do anything like this. While maybe they should be legally obligated to do so, this is a personal opinion and you'd have to take this issue up with the law makers - it has no bearing on EQT and their actions.
.... (continued in 2nd part).....
… continued:
7) WELL DBET FREE OTHER THAN FOR THE FACT THAT INVESTORS ARE STILL OWED HUNDREDS OF MILLIONS
Investor's funds are presently all accounted for - they still exist in the assets of the fund.
8) DO MORTGAGEE PROPERTIES PAY INTEREST? I ASSUME NOT
I imagine the interest costs are accounted for when the property is sold. See para 1).
9) WHAT IS THE EIF COMPONENT MEAN? DOES THAT MEAN THAT EPF ALSO CLAIMS INTEREST IN OUR ASSETS - JUST DON'T UNDERSTAND THIS PART - IF THERE IS A $77m VALUATION ON AN ASSET WHERE WE ARE OWED ONLY $32m , I AM GREATLY COMFORTED - BUT IF EIF AND EPF ARE BETWEEN THEM OWED SOME OTHER FIGURE ON THIS ONE FOR EXAMPLE - THEN LETS KNOW THE TRUE DISCLOSED DEBT TO LOAN RATION... RATHER THAN GETTING A PART ANSWER WHICH ON ITS FACE SEEMS A VERY COMFORTING ANSWER
Language can be so tricky! The "EIF COMPONENT" is the total amount of EIF funds in the project. Other financiers may have additional interests, hence the distinction. I dunno about the EPF involvement - it's irrelevant to me. I understand the EIF ranks first for payment.
10) 3) WHEN PROPERTY VALUES HAVE CLEARLY COLLAPSED OVER LAST 3 YEARS - THE USE OF 3 YEAR OLD VALUATIONS WOULD BE QUITE INAPPROPRIATE - OUR ONLY ASSET IS THE VALUE OF THE PROPERTIES. I SPOKE TO ONE LEADING VALUATION FIRM AND THEY SAID THAT A LARGE BULK VALUATION SUBJECT TO GEOGRAPHIC CONSTRAINTS COULD BE DONE AT $1 PER $1,000. SO IN YOUR $70M EXAMPLE - A COST OF $70,000. ASSUME THE WHOLE LOAN REGISTER IS $300m - $300,000 COST WHICH COMPARED TO $14M BEING TROUSERED BY EQUITITRUST SEEMS TO BE A SMALL COST FOR SUCH RE-ASSURANCE, COMFORT AND CERTAINITY - EVEN IF IT IS DOUBLE THAT COST - MAKE IT $600,000 - IN ANY EVENT, WE WOULD NOT NEED ALL LOANS DONE - PRESUMABLY THERE ARE SOME LOANS WITH VALUATIONS IN THE LAST 12 MONTHS OR SO - I DONT THINK THAT COST SAVING IS A RELEVANT EXCUSE FOR FAILURE TO HAVE CURRENT VALUED ASSETS
According to the CEO, "Valuations on the loan portfolio cost circa $300k-$500k to perform." It might not be big biscuits to some, but I agree with the concept of not paying if it's not necessary. While the valuations are done every three years, they are not necessarily all due at the same time, and they have all been done sometime in the past three years. If we take a median cost of ,say, $400k for a complete valuation, then (assuming your notion of "current value" requires yearly valuations) that would be 3 x $400k = a total of $1.2m over the three years. I accept EQT procedures on this one until I see some credible evidence that there is an associated problem.
11) NO - AN INDEPENDENT VALUATION IS JUST THAT 'INDEPENDENT' ...... INTERNAL SELF SERVING ANALYSIS IS NOT A LOGICAL PRACTICE AND IN ANY EVENT THE NATIONAL BANK LOAN HAS A CAP OF 24% ON IT - SO PRESUMABLY THEY DID SOME EXTERNAL APPRAISAL - IF THEY DID, WHAT WAS THEIR APPRAISAL? TO GO AS LOW AS 24% SETS OFF A WARNING BELL WITH ME THAT MAYBE THEY TOOK A JAUNDICED VIEW OF THE VALUES USED IN THE LOAN BOOK. LETS GET THEIR FIGURE? OF WHAT ETSTING AND VERIFICATION DID KPMG DO AS PART OF THEIR AUDIT? OR DID THEY SIMPLY IGNORE THE VALUES OF THE GROSS ASSETS?
Yes, EQT could be dudding the valuations, just like there could have been weapons of mass destruction. The procedures could be designed to be absolutely watertight and fault free, but in the absence of world wide perfection let's get some proof of wrongdoing before jumping the gun.
12) NO MAGIC WAND - IT NEEDS DISCLOSURE OF A SIMPLE CASH FLOW ANALYSIS FOR LAST YEAR AND A LIKLEY CASH FLOW ANALYSIS FOR 2011 - THEN WE CAN ALL FORM A VIEW BASED ON FACTS
For last year’s facts, see p10 of the Financial Statement 09/10 - "Statement of Cash Flows". For future projections, I would contact EQT, or use the data in the latest Financial Report to make my own assumptions. There are no guarantees either way, since the future can be a slippery concept that doesn’t always conform to the forecasting of the present.
Cheers!
7) WELL DBET FREE OTHER THAN FOR THE FACT THAT INVESTORS ARE STILL OWED HUNDREDS OF MILLIONS
Investor's funds are presently all accounted for - they still exist in the assets of the fund.
8) DO MORTGAGEE PROPERTIES PAY INTEREST? I ASSUME NOT
I imagine the interest costs are accounted for when the property is sold. See para 1).
9) WHAT IS THE EIF COMPONENT MEAN? DOES THAT MEAN THAT EPF ALSO CLAIMS INTEREST IN OUR ASSETS - JUST DON'T UNDERSTAND THIS PART - IF THERE IS A $77m VALUATION ON AN ASSET WHERE WE ARE OWED ONLY $32m , I AM GREATLY COMFORTED - BUT IF EIF AND EPF ARE BETWEEN THEM OWED SOME OTHER FIGURE ON THIS ONE FOR EXAMPLE - THEN LETS KNOW THE TRUE DISCLOSED DEBT TO LOAN RATION... RATHER THAN GETTING A PART ANSWER WHICH ON ITS FACE SEEMS A VERY COMFORTING ANSWER
Language can be so tricky! The "EIF COMPONENT" is the total amount of EIF funds in the project. Other financiers may have additional interests, hence the distinction. I dunno about the EPF involvement - it's irrelevant to me. I understand the EIF ranks first for payment.
10) 3) WHEN PROPERTY VALUES HAVE CLEARLY COLLAPSED OVER LAST 3 YEARS - THE USE OF 3 YEAR OLD VALUATIONS WOULD BE QUITE INAPPROPRIATE - OUR ONLY ASSET IS THE VALUE OF THE PROPERTIES. I SPOKE TO ONE LEADING VALUATION FIRM AND THEY SAID THAT A LARGE BULK VALUATION SUBJECT TO GEOGRAPHIC CONSTRAINTS COULD BE DONE AT $1 PER $1,000. SO IN YOUR $70M EXAMPLE - A COST OF $70,000. ASSUME THE WHOLE LOAN REGISTER IS $300m - $300,000 COST WHICH COMPARED TO $14M BEING TROUSERED BY EQUITITRUST SEEMS TO BE A SMALL COST FOR SUCH RE-ASSURANCE, COMFORT AND CERTAINITY - EVEN IF IT IS DOUBLE THAT COST - MAKE IT $600,000 - IN ANY EVENT, WE WOULD NOT NEED ALL LOANS DONE - PRESUMABLY THERE ARE SOME LOANS WITH VALUATIONS IN THE LAST 12 MONTHS OR SO - I DONT THINK THAT COST SAVING IS A RELEVANT EXCUSE FOR FAILURE TO HAVE CURRENT VALUED ASSETS
According to the CEO, "Valuations on the loan portfolio cost circa $300k-$500k to perform." It might not be big biscuits to some, but I agree with the concept of not paying if it's not necessary. While the valuations are done every three years, they are not necessarily all due at the same time, and they have all been done sometime in the past three years. If we take a median cost of ,say, $400k for a complete valuation, then (assuming your notion of "current value" requires yearly valuations) that would be 3 x $400k = a total of $1.2m over the three years. I accept EQT procedures on this one until I see some credible evidence that there is an associated problem.
11) NO - AN INDEPENDENT VALUATION IS JUST THAT 'INDEPENDENT' ...... INTERNAL SELF SERVING ANALYSIS IS NOT A LOGICAL PRACTICE AND IN ANY EVENT THE NATIONAL BANK LOAN HAS A CAP OF 24% ON IT - SO PRESUMABLY THEY DID SOME EXTERNAL APPRAISAL - IF THEY DID, WHAT WAS THEIR APPRAISAL? TO GO AS LOW AS 24% SETS OFF A WARNING BELL WITH ME THAT MAYBE THEY TOOK A JAUNDICED VIEW OF THE VALUES USED IN THE LOAN BOOK. LETS GET THEIR FIGURE? OF WHAT ETSTING AND VERIFICATION DID KPMG DO AS PART OF THEIR AUDIT? OR DID THEY SIMPLY IGNORE THE VALUES OF THE GROSS ASSETS?
Yes, EQT could be dudding the valuations, just like there could have been weapons of mass destruction. The procedures could be designed to be absolutely watertight and fault free, but in the absence of world wide perfection let's get some proof of wrongdoing before jumping the gun.
12) NO MAGIC WAND - IT NEEDS DISCLOSURE OF A SIMPLE CASH FLOW ANALYSIS FOR LAST YEAR AND A LIKLEY CASH FLOW ANALYSIS FOR 2011 - THEN WE CAN ALL FORM A VIEW BASED ON FACTS
For last year’s facts, see p10 of the Financial Statement 09/10 - "Statement of Cash Flows". For future projections, I would contact EQT, or use the data in the latest Financial Report to make my own assumptions. There are no guarantees either way, since the future can be a slippery concept that doesn’t always conform to the forecasting of the present.
Cheers!
Re: EquitiTrust - still feeling very vulnerbale
I think in summary what OLMAN is saying on behalf of EQUITITRUST, is that:-
1. valuations are not done regularly and the justification is that $400K cost per annum across a $300M potfolio is excessive and lets not jump too quickly until we have evidence of anything being wrong. With respect, things in the finance sector are not right - anyone knows that. In case of Equititrust redemptions are not being met! By his own admission, OLMAN admits that interest is not being paid in many cases but 'comforts' us by saying that it will (might?) get paid if and when the loan is repaid or the asset is sold up! Anyhow other than very very real cash flow concerns and ability to meet costs as they fall due - clealry, external investors and lenders could not rely upon internally prepared self serving valuations.
2. in terms of cash flow - there is some refernce to weapons of mass destruction, the connection to Equititrust escpaes me! I need to know what the future might hold. Now if Olman's briefing from Equititrust is that they simply don't know and it is all very rubbery - well, current valuations become all the more relevant.
3. I note the comment about returns paid etc and Equititrust applying them to impaired loans etc, but isn't this what the 'capital warranty' is all about - external invetsors taking no capital loss. Now, unless I am misisng the point here, loan assets are beign repaid, these are 'our' assets too! that money goes to pay back external lenders, opertaing costs, interest, and Equititrust's expenditure on properties, setting up new divisions such as Landsolve, paying themselves $14M a year - some of which they then apply to picking up losses on impiared loans - does this all mean that if we are not getting our capital redemtpions met, atht we are actually oaying , in cash terms, for the impaired losses - and this also makes the regular accurate current valuations more and more relevant. Because if assets keep getting sold up and or relaised and the moneys continue to dissipate as they seem to be getting allocated, that we will get left with the sub-stdnanrd assets that cannot be turned over (presumably) at what MIGHT be dubious valuations - and all of this against the backdrop of Olman and or Equititriust saying that they cannot forecast future cash flows with any accuracy.
Olman, are you an investor in Equitrust? or their PR department?
I think in summary what OLMAN is saying on behalf of EQUITITRUST, is that:-
1. valuations are not done regularly and the justification is that $400K cost per annum across a $300M potfolio is excessive and lets not jump too quickly until we have evidence of anything being wrong. With respect, things in the finance sector are not right - anyone knows that. In case of Equititrust redemptions are not being met! By his own admission, OLMAN admits that interest is not being paid in many cases but 'comforts' us by saying that it will (might?) get paid if and when the loan is repaid or the asset is sold up! Anyhow other than very very real cash flow concerns and ability to meet costs as they fall due - clealry, external investors and lenders could not rely upon internally prepared self serving valuations.
2. in terms of cash flow - there is some refernce to weapons of mass destruction, the connection to Equititrust escpaes me! I need to know what the future might hold. Now if Olman's briefing from Equititrust is that they simply don't know and it is all very rubbery - well, current valuations become all the more relevant.
3. I note the comment about returns paid etc and Equititrust applying them to impaired loans etc, but isn't this what the 'capital warranty' is all about - external invetsors taking no capital loss. Now, unless I am misisng the point here, loan assets are beign repaid, these are 'our' assets too! that money goes to pay back external lenders, opertaing costs, interest, and Equititrust's expenditure on properties, setting up new divisions such as Landsolve, paying themselves $14M a year - some of which they then apply to picking up losses on impiared loans - does this all mean that if we are not getting our capital redemtpions met, atht we are actually oaying , in cash terms, for the impaired losses - and this also makes the regular accurate current valuations more and more relevant. Because if assets keep getting sold up and or relaised and the moneys continue to dissipate as they seem to be getting allocated, that we will get left with the sub-stdnanrd assets that cannot be turned over (presumably) at what MIGHT be dubious valuations - and all of this against the backdrop of Olman and or Equititriust saying that they cannot forecast future cash flows with any accuracy.
Olman, are you an investor in Equitrust? or their PR department?
Equititrust.
Kostag:
As I have stated in two previous posts here, I am an investor in the Equititrust Income Fund. I am not a spokesman for the company, nor a representative of any PR department, and do not speak on anyone’s behalf other than my own. I have spoken directly to Equititrust management about my concerns and have clearly identified company comments in my posts; researched the available literature on the web; and related what I have learned for the general information of anyone interested, rather than jump to conclusions which cannot be substantiated and contain errors of fact.
I would like to know why you do not discuss any of your misgivings and queries with Equititrust management. Surely a necessary source of information is from the horse’s mouth? Why do you not answer any direct questions put to you in this thread, or in personal mail to you?
For the information of other readers, I was hoping for a more general discussion here. On the whole, Equititrust investors must be a relatively contented lot. There have been more than 500 views of this thread in the last week, and other than Kostag and me, no-one else has made any comment. I don’t pretend to have all the answers, but in the interests of understanding I am prepared to have a go at describing what I see as the current situation with the EIF.
There is much information on the problems with other Mortgage Lenders posted on this forum, and while there are issues raised about corruption, lies and what seems to be outright theft of investors’ funds, I am not convinced that Equititrust is in the same league. Nevertheless, it would be naïve not to remain cautious and open to all possibilities.
The FY2010 Financial Reports will be the next indicator of the health or otherwise of the Fund. By then all outstanding finance repayments should be substantially settled and the bare bones of the operation will be more readily visible. There are other factors which may further impact on future liquidity, but unless there is more interest in discussion of same I don’t see any point in raising them here at present.
If there are any other views from anyone out there, I am most interested in hearing about them.
Cheers to all.
Kostag:
As I have stated in two previous posts here, I am an investor in the Equititrust Income Fund. I am not a spokesman for the company, nor a representative of any PR department, and do not speak on anyone’s behalf other than my own. I have spoken directly to Equititrust management about my concerns and have clearly identified company comments in my posts; researched the available literature on the web; and related what I have learned for the general information of anyone interested, rather than jump to conclusions which cannot be substantiated and contain errors of fact.
I would like to know why you do not discuss any of your misgivings and queries with Equititrust management. Surely a necessary source of information is from the horse’s mouth? Why do you not answer any direct questions put to you in this thread, or in personal mail to you?
For the information of other readers, I was hoping for a more general discussion here. On the whole, Equititrust investors must be a relatively contented lot. There have been more than 500 views of this thread in the last week, and other than Kostag and me, no-one else has made any comment. I don’t pretend to have all the answers, but in the interests of understanding I am prepared to have a go at describing what I see as the current situation with the EIF.
There is much information on the problems with other Mortgage Lenders posted on this forum, and while there are issues raised about corruption, lies and what seems to be outright theft of investors’ funds, I am not convinced that Equititrust is in the same league. Nevertheless, it would be naïve not to remain cautious and open to all possibilities.
The FY2010 Financial Reports will be the next indicator of the health or otherwise of the Fund. By then all outstanding finance repayments should be substantially settled and the bare bones of the operation will be more readily visible. There are other factors which may further impact on future liquidity, but unless there is more interest in discussion of same I don’t see any point in raising them here at present.
If there are any other views from anyone out there, I am most interested in hearing about them.
Cheers to all.
Re: EquitiTrust: The Australian: 13-1-11
dont know who this is - but saw this comment on an article blogged to the Australian web site:
Disgruntled Equititrust Investor of Sydney Posted at 9:53 AM January 11, 2011
Another looming disaster which ASIC has ignored is Equititrust which is holding 240 million dollars of investor's money ransom for over 2 years. Despite the media highlighting the company's precarious position nationally yesterday ASIC still sits on its hands and does nothing. I am not surprised by ASIC's recalcitrance in the Oswal case above. It seems to be their standard procedure.
dont know who this is - but saw this comment on an article blogged to the Australian web site:
Disgruntled Equititrust Investor of Sydney Posted at 9:53 AM January 11, 2011
Another looming disaster which ASIC has ignored is Equititrust which is holding 240 million dollars of investor's money ransom for over 2 years. Despite the media highlighting the company's precarious position nationally yesterday ASIC still sits on its hands and does nothing. I am not surprised by ASIC's recalcitrance in the Oswal case above. It seems to be their standard procedure.
Equititrust – an investment bank with 'developmental skills'. A brief history for those concerned: Mark Mclivor, a former scrupulous mortgage and property lawyer founded Equititrust some 17 years ago. Well that’s the current company – where it all started was in a company called M C Mortgage Management Pty Ltd (ACN 051 165 587) in 1991, which rebranded to Equitiloan Securities Pty. Ltd., then to Equitiloan Pty. Ltd. and then to Moribund Pty. Ltd. – which I may mention is **UNDER EXTERNAL ADMINISTRATION and/or CONTROLLER APPOINTED** according to ASIC. For the faint hearted, that means there has been receivers and/or managers appointed as a result of the company not being able to pay its debts when they fell due and owing. Or in other words – it’s broke.
Follow this carefully – the current company (which so proudly has been around for 17 years) – also was incorporated as M C Mortgage Management Pty. Ltd. (ACN 061 383 944) in 1993, then rebranded to Equitiloan Pty Ltd. and then to Equititrust Ltd. There is no mistake here – an ASIC search reveals similar directors (for example, former Equititrust Director (and Mark Mclivors brother) Wayne McLivor was the director who signed the ASIC form 507C “Report as to Affairs Regarding Court Winding Up”. 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 – hence he resigned as a Director of Equititrust. Not to mention that Wayne is now involved with Insight Equity Ltd. – a direct competitor to Equititrust – I guess the old saying applies: Where you smell smoke, there is always a fire.
Lets move beyond Equititrust’s sister company being broke and on to its current situation. Mark Mclivor, Managing Director and Founder of Equititrust – WOW there has been a lot of name and title changing in that company – wasn’t he the Chief Executive Officer? An insolvency practitioner from Hong Kong – David Kennedy, has replaced Mark. David is apparently very good at his job but according to court transcripts he can’t even read a document (just signs away – helping to loose investors money in another investment scheme similar to Equititrust).
This $50 Million Priority Class Income Fund – hmm. Who will the prey be this time – pensioners life savings? Call me naive – but if it was SO safe and such a sound investment - why have both the CBA and NBA retreated out of the EIF and now the Bank of Scottland wants out of the EPIF? I am sorry – but this must be a heck on an investment.
Lets look at it for a second and play out a pretty serious scenario. This priority class income fund (Priority Fund) managed by Equititrust is to be the lender and the Equititrust Income Fund (EIF) is to be the borrower. EIF is borrowing to pay out the NAB (which sees the fund as a risk – obviously) and to commence redemptions to those investors who currently have their money FROZEN. What a plan, borrow more to get out of a debt problem - clever. Anyway, everything is going beautifully – BUT, what happens when the EIF defaults under the loan documents because the value of the underlying security property is really lower than what Equititrust has divulged? OR alternatively Equititrust one month does not have enough earnings to pay interest on this loan because borrowers are in default and cannot afford to pay interest? – (remembering that a large proportion of the EIF’s investments are currently in default). Well in a traditional matter the borrower would be in default and the lender would take action to recover monies lent.
But this could be of detriment to the EIF so Equititrust writes to the investors of the Priority Fund and says sorry we have had to freeze the fund (just like they did to the EIF) and you may have to wait for many years to receive your money back. Meanwhile, Equititrust as trustee for the EIF is enjoying freedom away from the stresses usually associated with default under a loan document. BUT DON’T WORRY – we will still continue to advertise on our website “Post the global financial crisis, our record speaks for itself. In 17 years we've never lost a cent of Equititrust's investors' capital.” YEAH SURE but can I have my money back please – response “sorry the fund is frozen, but we haven’t lost it yet”.
In actual fact, Equititrust as trustee for the Priority Fund may decide that it cant even pay the Benchmark amount (which I stress is not an interest rate – it is only the rate investors must receive before Equititrust receives its [exorbitant] management fee – on top of something called an expiry fee & other fees, fees, fees – how else to you sustain some 50m in retained earnings?) – BUT DON’T FORGET, Equititrust is still receiving its management fee on the EIF so Equititrust need not worry! All in all – Bank’s want out – so should you. Why do you think most investors want out of the EIF?
Follow this carefully – the current company (which so proudly has been around for 17 years) – also was incorporated as M C Mortgage Management Pty. Ltd. (ACN 061 383 944) in 1993, then rebranded to Equitiloan Pty Ltd. and then to Equititrust Ltd. There is no mistake here – an ASIC search reveals similar directors (for example, former Equititrust Director (and Mark Mclivors brother) Wayne McLivor was the director who signed the ASIC form 507C “Report as to Affairs Regarding Court Winding Up”. 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 – hence he resigned as a Director of Equititrust. Not to mention that Wayne is now involved with Insight Equity Ltd. – a direct competitor to Equititrust – I guess the old saying applies: Where you smell smoke, there is always a fire.
Lets move beyond Equititrust’s sister company being broke and on to its current situation. Mark Mclivor, Managing Director and Founder of Equititrust – WOW there has been a lot of name and title changing in that company – wasn’t he the Chief Executive Officer? An insolvency practitioner from Hong Kong – David Kennedy, has replaced Mark. David is apparently very good at his job but according to court transcripts he can’t even read a document (just signs away – helping to loose investors money in another investment scheme similar to Equititrust).
This $50 Million Priority Class Income Fund – hmm. Who will the prey be this time – pensioners life savings? Call me naive – but if it was SO safe and such a sound investment - why have both the CBA and NBA retreated out of the EIF and now the Bank of Scottland wants out of the EPIF? I am sorry – but this must be a heck on an investment.
Lets look at it for a second and play out a pretty serious scenario. This priority class income fund (Priority Fund) managed by Equititrust is to be the lender and the Equititrust Income Fund (EIF) is to be the borrower. EIF is borrowing to pay out the NAB (which sees the fund as a risk – obviously) and to commence redemptions to those investors who currently have their money FROZEN. What a plan, borrow more to get out of a debt problem - clever. Anyway, everything is going beautifully – BUT, what happens when the EIF defaults under the loan documents because the value of the underlying security property is really lower than what Equititrust has divulged? OR alternatively Equititrust one month does not have enough earnings to pay interest on this loan because borrowers are in default and cannot afford to pay interest? – (remembering that a large proportion of the EIF’s investments are currently in default). Well in a traditional matter the borrower would be in default and the lender would take action to recover monies lent.
But this could be of detriment to the EIF so Equititrust writes to the investors of the Priority Fund and says sorry we have had to freeze the fund (just like they did to the EIF) and you may have to wait for many years to receive your money back. Meanwhile, Equititrust as trustee for the EIF is enjoying freedom away from the stresses usually associated with default under a loan document. BUT DON’T WORRY – we will still continue to advertise on our website “Post the global financial crisis, our record speaks for itself. In 17 years we've never lost a cent of Equititrust's investors' capital.” YEAH SURE but can I have my money back please – response “sorry the fund is frozen, but we haven’t lost it yet”.
In actual fact, Equititrust as trustee for the Priority Fund may decide that it cant even pay the Benchmark amount (which I stress is not an interest rate – it is only the rate investors must receive before Equititrust receives its [exorbitant] management fee – on top of something called an expiry fee & other fees, fees, fees – how else to you sustain some 50m in retained earnings?) – BUT DON’T FORGET, Equititrust is still receiving its management fee on the EIF so Equititrust need not worry! All in all – Bank’s want out – so should you. Why do you think most investors want out of the EIF?
Olman - I will start to make my way through this entire thread and comment on individual points which require input. But on a rather serious note - I am not sure what David Kennedy has divulged to you but in accordance with Equititrust's loan documents - the cost of a Valuation is borne by the Borrower not the lender. In actual fact, all Equititrust needs to do is request a valuation from the Borrower and if the Borrower does not comply the Borrower would be in breach of the loan covenants and automatically in default.
I think you have been mislead away from the underlying point - what valuations were 12-18 months ago, take 40% off and you have the current market valuation. A cost of 400k by Equititrust is a vast overstatement and i am afraid you have been lied to by a man newly found as CEO of Equititrust. To be honest, have a little look into David Kennedy's past - and particular, his old job. Peruse the court documents (where he was required to give evidence) and then have a think to yourself about the integrity of his word.
I think you have been mislead away from the underlying point - what valuations were 12-18 months ago, take 40% off and you have the current market valuation. A cost of 400k by Equititrust is a vast overstatement and i am afraid you have been lied to by a man newly found as CEO of Equititrust. To be honest, have a little look into David Kennedy's past - and particular, his old job. Peruse the court documents (where he was required to give evidence) and then have a think to yourself about the integrity of his word.
Re: EquitiTrust: this material from ZENCORP is unbelievable
Zencorp - if ever you need a job at giving analysis and advice, call me! Is what you are saying true and provable! If so, this is REDHOT! How come ASIC and APRA can let a new PROSPECTUS be floated on the Internet promising real solid returns when all of this is true. The new money (CAPITAL) being raised is being raised to both pay back existing loans (IN DEFAULT) and also some allowance for the $60M plus of 'mums and dads' who after 2 years still cannot get their money!
By definition, isn't borrowing new moneys to pay back returns on the old money somethign developed by Charles Ponzi! and called a PONZI SCHEME!
so what is really going on?
and how could David Kennedy and David Andersen both whom most recently ran the failed MFS OCTAVIAR finance collapse , be in control now?
I guess the NATIONAL BANK can happily sit because they have themselves secured ahead of all of us wood ducks - we should get some of our money back - but only after Bank of Scotland and National Bank 'nab' their moneys and fees. We lose again! Thanks ASIC and thanks APRA! Not.
Now, if we take a good look at the loan book of EQUITITRUST we now see that a good percentage of the loans are Qlsd and regional and whilst you cannot blame Equititrust for the recnet floods, if respected property veteran Kevin Seymour is even half right - the Qlsd secuirty- particulalry regional Qlsd - held by Equititrust has halved in value! so we are all really in the financial quagmire!
I heard that McIvor has a big exposure in Ipswich area (over $50M) to a character called Quinlivin and a big direct exposure of $15M plus in Toowoomba. This would be lovely, wouldn't it?
The catchcry for Equititrust should perhaps now be "you've earned the equity - we'll send you bust!"
Zencorp - if ever you need a job at giving analysis and advice, call me! Is what you are saying true and provable! If so, this is REDHOT! How come ASIC and APRA can let a new PROSPECTUS be floated on the Internet promising real solid returns when all of this is true. The new money (CAPITAL) being raised is being raised to both pay back existing loans (IN DEFAULT) and also some allowance for the $60M plus of 'mums and dads' who after 2 years still cannot get their money!
By definition, isn't borrowing new moneys to pay back returns on the old money somethign developed by Charles Ponzi! and called a PONZI SCHEME!
so what is really going on?
and how could David Kennedy and David Andersen both whom most recently ran the failed MFS OCTAVIAR finance collapse , be in control now?
I guess the NATIONAL BANK can happily sit because they have themselves secured ahead of all of us wood ducks - we should get some of our money back - but only after Bank of Scotland and National Bank 'nab' their moneys and fees. We lose again! Thanks ASIC and thanks APRA! Not.
Now, if we take a good look at the loan book of EQUITITRUST we now see that a good percentage of the loans are Qlsd and regional and whilst you cannot blame Equititrust for the recnet floods, if respected property veteran Kevin Seymour is even half right - the Qlsd secuirty- particulalry regional Qlsd - held by Equititrust has halved in value! so we are all really in the financial quagmire!
I heard that McIvor has a big exposure in Ipswich area (over $50M) to a character called Quinlivin and a big direct exposure of $15M plus in Toowoomba. This would be lovely, wouldn't it?
The catchcry for Equititrust should perhaps now be "you've earned the equity - we'll send you bust!"
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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
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
Re: EquitiTrust: a ponzi scheme - borrowing new to repay old
well, one must admire Mr Kennedy for one thing - he does not hide from issues.
I posed a question sometime ago though which has been avoided. Mr Kennedy as CEO would know the answer to this better than probably anyone and he also knows as a lawyer, excatly what his liabiltiies are:-
1. Is Equititrust currently trading on teh basis that it can meet its liabilties as and when they fall due?
2. In relation to the loans (let's limit this to the major loans) are all the larger loans (say over $10million) current, that interest being paid, rather than being accrued, by the Mortgagors? and if not, to what extent, let's say in tens of millions - are loans not being serviced by the Mortgagors?
3. Was the National Bank loan repayments of $3M a month paid in Dec 2010 and Jan 2011?
4. In relation to the loan portfolio generally, is Mr Kennedy as CEO able to assure all investors that all loans are in good order - save for the disclosed provisioned loans - paying their interest; and the valuations on those loans current and relevant and reflective of the arm's length nature represented between Lender and Borrower?
1.
well, one must admire Mr Kennedy for one thing - he does not hide from issues.I posed a question sometime ago though which has been avoided. Mr Kennedy as CEO would know the answer to this better than probably anyone and he also knows as a lawyer, excatly what his liabiltiies are:-
1. Is Equititrust currently trading on teh basis that it can meet its liabilties as and when they fall due?
2. In relation to the loans (let's limit this to the major loans) are all the larger loans (say over $10million) current, that interest being paid, rather than being accrued, by the Mortgagors? and if not, to what extent, let's say in tens of millions - are loans not being serviced by the Mortgagors?
3. Was the National Bank loan repayments of $3M a month paid in Dec 2010 and Jan 2011?
4. In relation to the loan portfolio generally, is Mr Kennedy as CEO able to assure all investors that all loans are in good order - save for the disclosed provisioned loans - paying their interest; and the valuations on those loans current and relevant and reflective of the arm's length nature represented between Lender and Borrower?
1.
Re: EquitiTrust: a ponzi scheme - borrowing new to repay old THE FLAGS ARE UP
Following on from earlier comments - lets all be objective for a moment.
Investors in Equititrust hardly want it to fail, but they probably do want losses and overheads to stop and they’d love to see their money back.
Borrowers – bad ones or good ones - hardly want Equititrust to fall-over and then face a gauntlet of litigation.
Opposition? I don’t know. I suspect industry peers don’t want to see more blood on the streets. It would no no-one any good. Correct?
Now, David Kennedy. Well, he seems to be doing a good job. But what’s his job? Surely his first job is to keep his job. So David has to accept that anything that he says must be viewed as biased. Secondly, despite what is said, he did preside in a very senior role at MFS and in its dying days certainly turned a blind eye to a regime that allowed assets to be plundered and moneys shuffled around. Well, that’s how I read the media coverage of his less than frank court evidence.
So what is all this threads and posting really about?
David Kennedy is correct on this point, we are all guessing and running blind. However, the selective material that is released and the spin we are fed does not help. You cannot run a mantra that no investor has suffered a loss for 17years, when for the past 2 to 3 years, there are tens of millions of dollars of mums and dads who cannot get their money out.
You cannot simply blame the big bad banks. Equititrust borrowed hundreds of millions of dollars from the banks over 3 years ago. Now, knowing that it runs a relatively short term book, it was Equititrust’s job to ensure that within some reasonable percentage, that the repayment of those loans was covered. The fact that some three years latter, there is still $44million owing (if that is the true figure) is not a source of comfort, I have to say.
But let’s just use some dead reckoning and try to dig deeper.
Let’s say that the average Equititrust loan is 2 years. Let’s say. Their rates are high so we can assume that most people don’t borrow form them for the long haul.
Now, the GFC started when, let’s say Nov 2008. That’s what, about 27months ago?
Equititrust says (David Kennedy says in his posting in fact) that values have not dropped much, and lets say that Equititrust on average loans lets say 70% of value.
Now, being a prudent mortgage manager, as at the start of the GFC 50% of the loans must have lad an outstanding life of less than 1 year, for every dollar that had a life of over 2 years. Correct?
Now, if a reasonable percentage of those were good borrowers, you would expect that a) loans would have been repaid and let’s assume that half the loan book paid back, well if the loan book was at one time how much $450million or more? Well wasn’t that money siphoned off to the banks and what happened to the rest?
But look at the remaining loans. Are we actually saying that as Equititrust would not have made any new loans since Nov 2008, as it had no spare money (it couldn’t pay me back, so one must assume it would not make a new loan and leave us all in the lurch), so half the loan book, some $225million cannot pay their loans back and worse, assuming that we are told the truth and the lending ratio is 70% or so, Equititrust cannot sell the underlying securities and clear the loans that way?
So, we investors then look on the Equititrust loan site and see not 4 or 5 staff like there used to be. We see probably closer to 45 staff, and many of them senior (and I guess) expensive executives. Many of them have come from other failed financiers and development companies. Now, we don’t blame them all for all the failures but it is hardly comforting that people who failed elsewhere in similar models are now presiding over our money.
So about half the loan book frankly cannot pay us back. After some 27 months there is not really an answer to recovery. We are told that redemptions will get caught up not from realisation of assets but from another new raising of capital where Equititrust is borrowing from mums and dads to lend to the ‘other’ Equititrust. And whilst this is going on, paid by either our money, management fees (which still come out of our money) or form new borrowings, is presumably millions and millions of salaries and wages to a ‘cast of thousands’ who frankly, other than web site spin, have not delivered after some 27months.
Mr Kennedy, that’s what we are worried about.
I suspect that core values of larger loans are inflated; I suspect that overheads and operating costs and wages are all paid not from income but from the return of capital (our capital); I suspect that larger loans are not properly paying interest; and that the residual loons sitting on the ledgers are those that simply (and perhaps this is the fault of the GFC) cannot be realised and unlikely to be realised for some time. So in that instance, where there is life, there is perhaps hope. So we need to get rid of those pesky bankers who want their money out and once we have done that, we all know ASIC will do nothing, and the smucks like me will just get told ‘sorry guys, it was those dammed banks, you just have to wait - but you can rely on us , we have never missed a beat in 17years’.
I hope that I am wrong but all the flags are up.
Following on from earlier comments - lets all be objective for a moment.
Investors in Equititrust hardly want it to fail, but they probably do want losses and overheads to stop and they’d love to see their money back.
Borrowers – bad ones or good ones - hardly want Equititrust to fall-over and then face a gauntlet of litigation.
Opposition? I don’t know. I suspect industry peers don’t want to see more blood on the streets. It would no no-one any good. Correct?
Now, David Kennedy. Well, he seems to be doing a good job. But what’s his job? Surely his first job is to keep his job. So David has to accept that anything that he says must be viewed as biased. Secondly, despite what is said, he did preside in a very senior role at MFS and in its dying days certainly turned a blind eye to a regime that allowed assets to be plundered and moneys shuffled around. Well, that’s how I read the media coverage of his less than frank court evidence.
So what is all this threads and posting really about?
David Kennedy is correct on this point, we are all guessing and running blind. However, the selective material that is released and the spin we are fed does not help. You cannot run a mantra that no investor has suffered a loss for 17years, when for the past 2 to 3 years, there are tens of millions of dollars of mums and dads who cannot get their money out.
You cannot simply blame the big bad banks. Equititrust borrowed hundreds of millions of dollars from the banks over 3 years ago. Now, knowing that it runs a relatively short term book, it was Equititrust’s job to ensure that within some reasonable percentage, that the repayment of those loans was covered. The fact that some three years latter, there is still $44million owing (if that is the true figure) is not a source of comfort, I have to say.
But let’s just use some dead reckoning and try to dig deeper.
Let’s say that the average Equititrust loan is 2 years. Let’s say. Their rates are high so we can assume that most people don’t borrow form them for the long haul.
Now, the GFC started when, let’s say Nov 2008. That’s what, about 27months ago?
Equititrust says (David Kennedy says in his posting in fact) that values have not dropped much, and lets say that Equititrust on average loans lets say 70% of value.
Now, being a prudent mortgage manager, as at the start of the GFC 50% of the loans must have lad an outstanding life of less than 1 year, for every dollar that had a life of over 2 years. Correct?
Now, if a reasonable percentage of those were good borrowers, you would expect that a) loans would have been repaid and let’s assume that half the loan book paid back, well if the loan book was at one time how much $450million or more? Well wasn’t that money siphoned off to the banks and what happened to the rest?
But look at the remaining loans. Are we actually saying that as Equititrust would not have made any new loans since Nov 2008, as it had no spare money (it couldn’t pay me back, so one must assume it would not make a new loan and leave us all in the lurch), so half the loan book, some $225million cannot pay their loans back and worse, assuming that we are told the truth and the lending ratio is 70% or so, Equititrust cannot sell the underlying securities and clear the loans that way?
So, we investors then look on the Equititrust loan site and see not 4 or 5 staff like there used to be. We see probably closer to 45 staff, and many of them senior (and I guess) expensive executives. Many of them have come from other failed financiers and development companies. Now, we don’t blame them all for all the failures but it is hardly comforting that people who failed elsewhere in similar models are now presiding over our money.
So about half the loan book frankly cannot pay us back. After some 27 months there is not really an answer to recovery. We are told that redemptions will get caught up not from realisation of assets but from another new raising of capital where Equititrust is borrowing from mums and dads to lend to the ‘other’ Equititrust. And whilst this is going on, paid by either our money, management fees (which still come out of our money) or form new borrowings, is presumably millions and millions of salaries and wages to a ‘cast of thousands’ who frankly, other than web site spin, have not delivered after some 27months.
Mr Kennedy, that’s what we are worried about.
I suspect that core values of larger loans are inflated; I suspect that overheads and operating costs and wages are all paid not from income but from the return of capital (our capital); I suspect that larger loans are not properly paying interest; and that the residual loons sitting on the ledgers are those that simply (and perhaps this is the fault of the GFC) cannot be realised and unlikely to be realised for some time. So in that instance, where there is life, there is perhaps hope. So we need to get rid of those pesky bankers who want their money out and once we have done that, we all know ASIC will do nothing, and the smucks like me will just get told ‘sorry guys, it was those dammed banks, you just have to wait - but you can rely on us , we have never missed a beat in 17years’.
I hope that I am wrong but all the flags are up.
I posed a question sometime ago though which has been avoided. Mr Kennedy as CEO would know the answer to this better than probably anyone and he also knows as a lawyer, excatly what his liabiltiies are:-
1. Is Equititrust currently trading on teh basis that it can meet its liabilties as and when they fall due?
2. In relation to the loans (let's limit this to the major loans) are all the larger loans (say over $10million) current, that interest being paid, rather than being accrued, by the Mortgagors? and if not, to what extent, let's say in tens of millions - are loans not being serviced by the Mortgagors?
3. Was the National Bank loan repayments of $3M a month paid in Dec 2010 and Jan 2011?
4. In relation to the loan portfolio generally, is Mr Kennedy as CEO able to assure all investors that all loans are in good order - save for the disclosed provisioned loans - paying their interest; and the valuations on those loans current and relevant and reflective of the arm's length nature represented between Lender and Borrower?
1.
No Trust
JUSTICE IS COMING...
- Joined
- 22 November 2010
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January 10 2011 Business Day Sydney Morning Herald "Equititrust acknowledges potential conflict in funding roles" the article by Colin Kruger is very well researched and to the point. The fact that The Sydney Morning Herald ran the story and outlined the facts is enough said. The story was subsequently run nationally through the Fairfax Newspapers.
No Trust
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"Frozen funds still raising money, say auditors" Anthony Klan - The Australian March 02, 2010 is another well written article by a multi award winning Australian journalist.
The above articles are easily found by a simple google search and make interesting reading as they are objective and well researched.
I commend the two journalists for their efforts in highlighting another potential problem area in an industry beset with collapses.
The above articles are easily found by a simple google search and make interesting reading as they are objective and well researched.
I commend the two journalists for their efforts in highlighting another potential problem area in an industry beset with collapses.
A new username called "No Trust" is a little suspect when talking of objectivity in this thread, doncha think? As for awards, Hitler wore many medals and history showed us his worth. This is not to denigrate the journos - they are paid to write after all, but the beat up of their credentials is irrelevant. Besides, what were these "multi awards" won by the journo?
Nothing new in all this - the statements concerning Equititrust are available on the Equititrust website in the Financial Reports, and the bulk of the article refers to the Richmond Mortgage Fund. It's a bit of a stretch to call them "well researched", considering the lack of real content.
No Trust's post is a beat up.
Now, to avoid a punch up on the board, I think I'll go and register under another username....
I think the Equititrust reply has addressed these points.
No Trust
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In response to the above postings, the username No Trust has been registered for some time and is a "general statement" about the public's scepticism of banks and financial institutions..
To mention Hilter when referring to respected journalists and punch up's on the board seems to speak for itself..
As for a recent award please refer to 1 Nov 2010 ... THE Australian's Anthony Klan was named winner of the Sir Keith Murdoch award for excellence in journalism.
The post is not a beat up in any sense of the word, it is referring to well researched credible, financial jounalism which obvioulsy some find hard to swallow.
The January 10 2011 Business Day Sydney Morning Herald Article "Equititrust acknowledges potential conflict in funding roles" by Colin Kruger was ignored. This article is the most recent published on a national level and I again commend the Journalist for highlighting the issue..
To mention Hilter when referring to respected journalists and punch up's on the board seems to speak for itself..
As for a recent award please refer to 1 Nov 2010 ... THE Australian's Anthony Klan was named winner of the Sir Keith Murdoch award for excellence in journalism.
The post is not a beat up in any sense of the word, it is referring to well researched credible, financial jounalism which obvioulsy some find hard to swallow.
The January 10 2011 Business Day Sydney Morning Herald Article "Equititrust acknowledges potential conflict in funding roles" by Colin Kruger was ignored. This article is the most recent published on a national level and I again commend the Journalist for highlighting the issue..
You registered on ASF 22 Nov 2010, with only two posts here, both in this thread today (three now). There are a number of other threads in this forum on banks and financial institutions but you have not commented elsewhere.
Although I can relate to the rationale behind the name as per your explanation, all you have said in your posts is that you applaud the journos - other than that you have offered nothing to the debate. Pardon my scepticism.
The analogy with Hitler and medals illustrates the problems with accepting industry accolades as proof of virtue - I'm sorry you don't get that. Read Kostag's posts and you may understand the concept of punch-ups on the board - don't be too literal with your dissection of the language, it's the idea that's important.
My comments about Klan equally apply to Kruger - the information is not news, being all available on the Equititrust web site. My Google search on Klan shows one award - this does not qualify him as a "multi-award winner" as per your post.
I'm interested in intelligent debate from any source, but when intelligence and debate are both missing I do tend to become irritated by senseless negativity. The Eqititrust issue is important to the investors, and nonsensical distractions do nothing to further the discussion. I stand by my comments.
No Trust
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In response to the above posting:
• Olman only registered in November 2010
• What threads I respond to is entirely up to me. My response in regard to this thread was precipitated by the fact that the national media has found cause to shine a spotlight on the issue..
• I am sure better analogies can be found other than "Hilter".. to refer to credible awards given to respected journalists.
• In terms of information, it seems your solution is the ultimate source of information should be the Equititrust Website.. I think any reasonable person would be sceptical of this.
• The investors both present and incoming should have as wide a view of the facts as possible.
Please also refer to:
Business Journalist of the Year 2007
Anthony Klan, The Australian, who led the paper’s news breaking coverage of the Fincorp collapse.
In any independent assessment of the facts would conclude this does qualify Anthony Klan as a "Multi Award Winning Journalist"
In terms of the information it was clear that Anthony Klan's coverage was more reliable than the Fincorp Website..
It seems the only recent award Equititrust has won is a Choice Shonky Award in 2008. Given again by the highly respected consumer magazine Choice.
• In terms transparency and debate, the fact that someone is irritated and highly sensitive to published articles which shine a spotlight on the subject is of no consequence.. This is a forum for free and open discussion.
• In regard to the Equititrust Website noticeably absent are the interim financials usually posted in December as well as the annual review usually posted in August.
• Olman only registered in November 2010
• What threads I respond to is entirely up to me. My response in regard to this thread was precipitated by the fact that the national media has found cause to shine a spotlight on the issue..
• I am sure better analogies can be found other than "Hilter".. to refer to credible awards given to respected journalists.
• In terms of information, it seems your solution is the ultimate source of information should be the Equititrust Website.. I think any reasonable person would be sceptical of this.
• The investors both present and incoming should have as wide a view of the facts as possible.
Please also refer to:
Business Journalist of the Year 2007
Anthony Klan, The Australian, who led the paper’s news breaking coverage of the Fincorp collapse.
In any independent assessment of the facts would conclude this does qualify Anthony Klan as a "Multi Award Winning Journalist"
In terms of the information it was clear that Anthony Klan's coverage was more reliable than the Fincorp Website..
It seems the only recent award Equititrust has won is a Choice Shonky Award in 2008. Given again by the highly respected consumer magazine Choice.
• In terms transparency and debate, the fact that someone is irritated and highly sensitive to published articles which shine a spotlight on the subject is of no consequence.. This is a forum for free and open discussion.
• In regard to the Equititrust Website noticeably absent are the interim financials usually posted in December as well as the annual review usually posted in August.
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