First Guardian victims recoup 8% of $38m loan

Victims of the First Guardian Master Fund will only recoup $2.9 million out of a $38.3 million loan made by responsible entity Falcon Capital, according to liquidators who said the amount represents a realistic commercial value compared to alternative options.

FTI Consulting, which was appointed as joint liquidators of Falcon, said the recoverable amount with respect to the Western Subdivisions is "much less" than unitholders in the First Guardian Master Fund would have expected based on Falcon's disclosures to liquidators at the time of their appointment.

Falcon entered into a loan agreement with Western Subdivisions, which would fund the acquisition of 335-415 Hamilton Highway in Fyansford, Victoria. The facility came to $33.5 million, but by mid-May 2024 Falcon had advanced $23 million to Western Subdivisions.

The loan provided to Western Subdivisions was unsecured. Western Subdivisions also does not own the property and appears to have no assets with which to repay the loan.

Falcon also advanced the loan to the Guerinat Group, with no contractual right for Falcon to recover those amounts from group members, which included the purchase of 1190 Doherty Road in Tarneit, Victoria.

FTI Consulting determined the total advance relating to the two parties came to $38.3 million.

Some $1 million of the $2.9 million is already held in trust pending release upon the court's approval. This is essentially 7.5 cents out of $1.

FTI Consulting acknowledged the recoverable amount is well below the amounts loaned and prior valuations at the time of the liquidator's appointment.

The settlement provides a "better net commercial outcome for Falcon and its stakeholders than alternatives" such as pursing litigation against the Guerinat Group, FTI Consulting said, adding if Falcon went down an unsuccessful litigation path it may incur further adverse costs.

Many victims disagreed this was "the best commercial outcome". On the First Guardian and Shield Superannuation Discussion group on Facebook, one member described the recoverable amounts as "another fire sale".

One member said it was "another bitter pill" for investors and many others vented their frustration at the "disappointing" outcome.

The liquidators notified unitholders about the settlement's commercial rationale on July 1.

Also on this date, FTI Consulting applied to the Federal Court seeking approval for the amount detailed in the deed of settlement entered into with Western Subdivisions.