This document has been updated to reflect questions received by the Administrators in relation to ACR since their appointment on 4 June 2007. It is available on the www.pwcrecovery.com website (listed under ‘Businesses Under Management, ACR, Published Documents) and has also been sent in hard copy to all Noteholders.
The summary below highlights which questions are new or have been updated.
Background and current status of Noteholders investments
Impact for Noteholders
Noteholder information
The Investigation
Other questions
Background and current status of Noteholders investments
1. Who are the Administrators of ACR?
PricewaterhouseCoopers partners Phil Carter and Greg Hall were appointed as the Voluntary Administrators for Australian Capital Reserve (ACR) and all Noteholders during the First Meeting of Creditors on 4 June, 2007.
The appointment was made on the vote of Permanent Nominees (Aust.) Ltd, the Trustee that acts on behalf of Noteholders, as the major creditor of ACR.
ACR is one of 26 companies in the Estate Property Group. On 28 May, 2007 Scott Kershaw, Murray Smith, Joseph Hayes and Colin Nicol of McGrathNicol were appointed as the Voluntary Administrators of the Estate Property Group (EPG). They continue to act on behalf of the other 25 companies that make up EPG.
Greg Hall and Phil Carter (from PwC) will act only for ACR and its creditors including the Trustee on behalf of its Noteholders. ACR has a key role to play regarding all decisions that may impact the properties because it has mortgages on all the properties. The former Administrators (McGrathNicol) will continue to act for the remainder of the EPG Group.
2. What is the impact of Administration of my investment?
Australian Capital Reserve’s (ACR’s) assets primarily consist of loans to various Estate Property Group (EPG) companies. Loans are supported by either first ranking or second ranking mortgages over properties owned by EPG.
Pursuant to the Corporations Act, all ACR investments were frozen from 28 May 2007 following the appointment of Voluntary Administrators.
This means that:
- You will no longer receive quarterly interest payments
- Your investment (including any interest reinvested or accrued up to 28 May 2007) will not be returned to you on its maturity date
- The rights to redeem or cancel notes prior to, at or after maturity are suspended until further advice.
Any amount owed to you is an unsecured claim against ACR.
Impact for Noteholders
1.What are ACR's assets?
Australian Capital Reserve’s (ACR’s) assets primarily consist of loans to various Estate Property Group (EPG) companies. Loans are generally supported by second ranking mortgages over properties owned by EPG.
2. How much will I get back?
In our Update to Noteholders dated 31 July 2007, the Administrators estimated a return to Noteholders of at least 60 cents in the dollar based on information and advice received at the time and work they had carried out up to that point. It was noted in the 31 July 2007 Update that this was a preliminary estimate and there were unresolved issues which will impact the amount ultimately recovered. The Administrators have not reviewed the estimate since 31 July 2007.
3. When will the second creditors meeting be held?
The second creditors meeting for Australian Capital Reserve (ACR) and Estate Property Group (EPG) will be held on 13 September 2007.
An information meeting for ACR Noteholders will also be held on 11 September 2007 at:
- NSW: Sydney Olympic Park Sports Centre at Homebush Bay. Formerly the State Sports Homebush;
- Victoria: CQ Function Centre in Queen Street, Melbourne;
- Queensland: Tattersall’s Club, Queen Street, Brisbane.
Noteholders will be notified of the details by mail closer to the date.
Information regarding the meetings will also be available closer to the date, to Noteholders for download on the website www.pwcrecovery.com by selecting ‘Australian Capital Reserve’ from the section ‘Businesses Under Management’.
4. Greg Hall stated that the company is "asset rich and cash poor”. What does this mean?
There is currently little cash in Australian Capital Reserve (ACR). However, ACR has significant assets which will be a source of cash in the future once the properties are sold.
5. When will I get my money back?
The timing of returns to Noteholders will primarily depend upon the timing of returns to Australian Capital Reserve (ACR) from the sale of the property portfolio by the Administrators of the Estate Property Group (EPG).
We are aware that many Noteholders have a pressing need for funds, and are aiming to make distributions of funds to Noteholders as soon as the property realisation strategy allows. An indication of timing will be given in the next Update.
6. Will there be any preferences given in the case of serious hardship, size of investment or maturity date of investment? In what order do I get paid in relation to other people?
The Corporations Act 2001 prohibits the Administrators from preferring individual Noteholder’s interests over the interests of other Noteholders irrespective of the circumstances.
There are no creditors of Australian Capital Reserve (ACR), which rank ahead of the Noteholders. However, within Estate Property Group (EPG) there are prior ranking mortgages which rank ahead of the loans from ACR, which were valued at approximately $220 million at 28 May 2007. The prior ranking mortgages will be settled prior to ACR receiving repayment of its loans.
7. What is the role of the Trustee? How does that affect me?
Noteholders are not creditors of Australian Capital Reserve (ACR) directly. Permanent Nominees (Aust.) Limited is the Trustee appointed to act on behalf of Noteholders, pursuant to the Trust Deed. The Trustee is the major creditor of ACR.
Noteholders will be represented by the Trustee at the second meeting of creditors.
The Administrators of ACR will communicate updates and options relating to the realisation of ACR assets and recovery of monies to Noteholders.
8. The update says that ACR holds first mortgages of 19m and second/third mortgages of 309m. What does this mean?
Australian Capital Reserve’s (ACR’s) loans to the Estate Property Group (EPG) are secured by either first, second or third ranked mortgages over the property assets owned by EPG.
The "ranking” of mortgages determines the order that debts get paid when a property is sold. Once the costs of selling a property are paid for, the remaining funds from the realisation are used to pay the first ranked mortgage holder the full amount of their principal, interest and costs. Any remaining funds are used to satisfy the second ranked mortgage holder, if one exists, and then the third ranked mortgage holder. A "prior ranking” mortgage is any mortgage which is ranked higher than ACR’s mortgage (eg first ranked and second ranked mortgages are prior ranked mortgages to any third ranked mortgage).
As at 28 May 2007, ACR had first ranked mortgages on certain properties for debts of $19m. When these properties are sold, ACR will be paid first from the realisations. The remaining $309m of ACR debts are secured by second or third ranked mortgages. In these cases, ACR debts will only be paid once prior ranked mortgages on these properties are paid in full. As at 28 May 2007, there were $227m worth of prior ranked mortgages.
9. I heard that Noteholders have been sent information in the post, but I haven’t received anything - what should I do?
Correspondence has been posted to Noteholders on 2 July 2007 and 31 July 2007.
The Noteholder Updates are also available to Noteholder for download on www.pwcrecovery.com. Select ‘Businesses Under Management’ from the menu on the left, then ‘Australian Capital Reserve’.
If you did not receive a schedule confirming your investment as a Noteholder in the 2 July 2007 Noteholder Update, please inform us via email (acrenquiry@au.pwc.com) or fax (+612 8286 0209) and a copy of the schedule will be posted to you.
10. I received details of my investment in the post, but why is the interest amount different to what I normally get every quarter?
The amount of interest shown on the statement is the interest up to 28 May 2007 (when Australian Capital Reserve was placed into Administration).
11. Will my investment earn interest during the period of administration?
You will earn interest on your investment up to 28 May 2007 (on which date the Administrators were appointed). Interest earned up to 28 May 2007 forms part of the investment of each Noteholder for the purposes of the Administration.
Interest will not be paid for the period after 28 May 2007 because the Corporations Act 2001 only allows the payment of that interest if all Noteholders have been returned their total investment including interest to 28 May 2007. This will not be the case.
Noteholder information
1. Will I get regular updates as to what is happening in the company?
Yes. Updates for Noteholders have been issued by mail to all Noteholders on 2 and 31 July 2007, and are also available to Noteholder at www.pwcrecovery.com under the "Businesses under Management” section.
Additional queries can be directed to the Australian Capital Reserve enquiry line (02) 8266 0891 between 9am and 5pm, Monday to Friday or via email at acrenquiry@au.pwc.com.
2. Will there be another Noteholders’ meeting?
Yes, an information meeting for ACR Noteholders will also be held on 11 September 2007 at:
- NSW: Sydney Olympic Park Sports Centre at Homebush Bay. Formerly the State Sports Homebush;
- Victoria: CQ Function Centre in Queen Street, Melbourne;
- Queensland: Tattersall’s Club, Queen Street, Brisbane.
Noteholders will be notified of the details by mail closer to the date. Information will also be available to Noteholders at www.pwcrecovery.com.
3. Will any information I give the Administrators regarding my investment be kept private?
Yes, the Administrators will keep all of this information private, except where they are required by law to divulge this information (e.g. in certain reports to ASIC).
4. When is the next Noteholder update going to be sent?
A further Noteholder Update will be mailed at the end of August and will contain information relevant to the Noteholders meeting on 11 September 2007.
The Investigation
1. Are you going to be suing anybody to get our money back?
The Administrators are carrying out detailed investigations regarding the business affairs of Australian Capital Reserve (ACR) and the results will be reported to creditors and ASIC. If there are legal actions available to the Administrators, these will be reviewed to determine if their pursuit is likely to provide value to ACR Noteholders.
2. Was Australian Capital Reserve trading whilst insolvent?
The question as to whether ACR was trading whilst insolvent will be addressed in the investigations being performed by the Administrators.
Other questions
1. Will I still be liable for tax on income earned from my investment but not paid to me?
You should always get your own separate tax advice, however generally for individuals; income from investments is not included in assessable income until it is received.
2. Will my investment still be included as an asset for Centrelink’s purposes?
A joint media release issued by the Department of Human Services and the Department of Community Services and Indigenous Affairs on 7 June 2007 states that:
"The Howard Government will provide practical help to Age Pensioners who had investments with the collapsed Australian Capital Reserve Limited. The Government will exempt investments in Australian Capital Reserve (ACR) from the deeming provisions of the Social Security income test.”
The full statement is available to Noteholders at www.pwcrecovery.com.
