LMIM liquidation on the cards
The administrator of troubled Australian mortgage fund manager LM Investment Management (LMIM) has called a creditors meeting on Thursday next week in Australia, where it will recommend liquidating the company.
FTI Consulting was appointed in March to take charge of LMIM, which was the fund manager for the First Mortgage Income Fund (FMIF) in which many New Zealand investors had money trapped.
The FMIF was frozen in late 2009 after its portfolio of mostly Gold Coast property development loans slid into arrears and default.
Since then investors, who thought they were exposed in safe property assets, have seen the unit price drop from A$1 ($1.15) to just 59 Australian cents, and have been warned to brace for further falls. Kiwi investors had A$140 million invested in the fund at the point it was frozen.
There has been a legal tug of war over the fund, with various parties vying for control.
In a hearing this month in the Queensland Supreme Court FTI made a bid to remain as the responsible entity for the fund, while Australian securities regulator ASIC asked for PwC to be appointed as receiver to wind it up.
ASIC said investors' interests were not being served by the prolonged wrangling over the fund, which was sold in New Zealand by advisers, including those of the now-disbanded Money Managers financial planning empire.
Still another party to the proceeding was fund manager Trilogy, which, with the backing of some Kiwi investors, sought to become the responsible entity. It argued FTI could not continue as it was in administration.
The judge reserved her decision, and it is not known whether it will be published before the creditors meeting. Notification of that meeting was sent today to the financial advisers who sold the fund to clients, and who are owed commission.
LMIM was founded by former Kiwi businessman Peter Drake, who now resides in Australia. He built a large enterprise managing property funds for retail and institutional investors.
Among them was the Managed Performance Fund now being liquidated by KordaMentha. It had no Kiwi investors.
Its flagship investment was a loan to a glamorous Queensland development called the Maddison Estate, which promised beach volleyball courts, a wave pool and aquatic centre.
Unitholders have now been told they may not recover a cent of the A$250m owed, and the grandiose plans had watered down to a basic residential subdivision.
Court-appointed trustee KordaMentha's latest report to investors warned the return on the existing investment was "likely minimal, and may be nil".