Hi pwinnie,it rather depends on the structure of the scheme and...

Hi pwinnie,

it rather depends on the structure of the scheme and the way in which the investors financed their involvement.

Whilst the papers keep talking about the huge debt of GTP (and TIM) when it went under, the truth is that a huge amount of that debt was in fact finance given to the company which the company then onlent to potential investors in oder for them to buy the companies products.

It really was quite rediculous in hindsight (or at the time for those of us who were following closely).

Effectively the banks appointed the company as an agent to lend money to its own customers which it was entirely in the comapnies interests to always do.

I never heard of any applicants being knocked back.

From what I have seen in the past it seems that many of the loans to clients were effectively unsecured. Sometimes they were notionly secured against the scheme units, other times, like a credit card loan, they were lent against other assets of the client.

The problems now for the administrators is the multitude of structures sitting under that.

In the early days GTP schemes took the total investment up front. With no further management payments due the schemes that need additional funds to operate will quickly be declared unviable even if they are actually quite decent operations.

Of the schemes that required ongoing management fees to be paid (most) then it will come down to the viability and pliability of the current investors. Will they continue making the payments. And what happens if they dont?

Most likely a failure to make management fees should mean they are in default and surrender their investment to the scheme.

In theory and depending on the loan structure, if they fail to make the loan repayments then they surrender their investment to the lender - which would ultimately be the consortium of banks lending at that time presumeably. The question then would be, are the banks then prepared to make the payments to maintain the scheme.

In all events, I would presume that the scheme continues unless it fails to make lease payments to the land owner (which is not the unit investors). In the case of TIM that will often be the TIM Land Trusts that were mostly listed.

A logical way to get MIS units into the hands of people who could see value in almost all schemes if they could enter at a fair and transparent price would be to list the units and for independent analysis to be provided to create a price discovery mechanism.

Buys would then be able tofind out where each scheme was at , what ongoing liabilities existed, and form an opinion as to likely returns.

Existing investors who needed out could sell and crystalise the loss for tax reasons whilst at the same time avoiding a complete default. And the sales would logically place the sold units into the hands of informed investors who would be presumed to be in a position to make payment of management fees which the administrators require to maintain the schemes.

And the banks could also use the same facility to transfer units from their books to avoid their needing to stump up ongoing management fees also whilst persuing the original client for outstanding balances.

The legislation to do all this was introduced by peter Costello in his final budget.

Cheers,