Elderslie collapse will hut mum and dad investors

Mums and dad investors along with self-funded retirees will be the losers in the collapse of Elderslie Finance Corporation, which went into receivership yesterday with $400 million in debts.

Mums and dad investors along with self-funded retirees will be the losers in the collapse of Elderslie Finance Corporation, which went into receivership yesterday with $400 million in debts.

Perpetual, the trustee of debenture holders, appointed a receiver to Elderslie and 15 of its subsidiaries yesterday. As trustee it appointed PricewaterhouseCoopers as investigative accountant.

But questions are already being asked about whether the mums and dads were properly informed about the speculative nature of their investments.

One source close to investigators says that on initial assessments it looks like mums and dads have the worst bit of the loan book. The NAB, Adelaide Bank and Societe Generale have an exposure to Elderslie.

“However it looks like the mums and dads were financing the bits of the loan book that the banks didn’t want.” That included very speculative investments including software, geospatial systems and telecommunications.

“There is also the question of a $67 million loan to (Elderslie director) Peter George which the receivers are expected to investigate. The loan was made from Elderslie to its parent company Hotel Nominees, which is controlled by Peter George.”

The Federal Court heard yesterday that Hotel Nominees had “no short-term capacity” to repay that loan.

Questions will also be asked about whether earlier action may have resulted in a better return to shareholders. PricewaterhouseCoopers told Perpetual in May that Elderslie needed a short-term cash injection to remain solvent and if it did not get the cash there could be a deficiency in assets over liabilities.

Rescue attempts to buy out Elderslie, led by former chairman of Elderslie John Hewson, fell through.

Read more on Elderslie

See also:

John Hewson’s Elderslie Finance in receivership

Elderslie back in court

Elderslie pins survival hopes on former realestate.com.au chief

High-risk finance group Elderslie in court battle

Hewson’s corporate bad luck continues with Elderslie