Projects - Risk Management

Project Euro

Loan portfolio review

Debenture Issuer had raised AU$50m from retail investors for small commercial property finance loans across a range of asset classes and locations ($AU1m – AU$5m)
The loan book was not diversified, most loans had repayment and interest arrears
The Debenture Trustee, on behalf of the investors, was concerned about the accuracy of the impairment position of the loans and the Debenture Issuer’s ability to repay investors and commissioned a review of a selection of loans
The existing Investigative Accountant had missed many deficiencies in the management of the loans and simply reviewed the cash flow based on management’s estimated repayment dates, without conducting an independent review of the loans and considering the realisable value of the security property, sale costs and time
Debenture Issuer was concerned the Trustee would appoint a Receiver

The Board of the Debenture Issuer instructed retrained us to respond to the report, review a selection of loans in the portfolio and report to the Trustee
Loan statements and accounting records were reconciled and underlying property assets were reviewed. Forensic analysis of the of the portfolio was conducted, including stress testing and scenario analysis
Independent report prepared, which identified the issues and risks, and provided a realistic strategy to minimize costs and protect investors
Workout strategies were identified for the distressed assets

Trustee adjusted its lender management strategy accordingly but allowed the Debenture Issuer to wind-down the book over 2 years
We were not retained on an ongoing basis.Facilitated over AU$30m in asset recoveries
The Debenture Issuer subsequently went into Administration