Australian class action law firm Bannister Law has announced it is investigating the collapse of neobank Volt Bank and the events leading up to the voluntary appointment of administrators at debt collector Collection House (ASX: CLH).
The two high-profile events came within one day of each other last week, leading media outlets including Business News Australia to speculate whether Collection House’s debt facility with Volt, secured against its investment in the neobank, was the spark that fuelled the appointment of administrators at CLH.
According to Bannister Law, the firm is investigating the conduct, management, forecasts and representations made to Volt investors as part of the neobank’s A-F equity funding rounds which raised $219 million in total.
Founded in 2017, neobank Volt told accountholders last week to withdraw all funds by 5 July after it made the “difficult decision” to close down and return its banking licence as it could not secure the funding needed to continue.
This meant the neobank’s customers, which had $113 million in deposits with Volt as of April 2022, had to withdraw their money and find an alternative bank.
“Selling remaining assets may yield a return to investors, but investors may also incur a loss and Bannister Law Class Actions is appealing to all investors in funding raises A-E to register their details and encourages investors to tell us what and when they were told by the company at the time of making their investments and subsequently so that we can gain a full picture of what has transpired,” Bannister Law said.
Similarly, Bannister Law is appealing to “anyone who may be able to assist in the investigation” of Collection House following the appointment of voluntary administrators last Thursday.
Collection House appointed FTI Consulting as voluntary administrators to develop a plan to save the business which has been hard-hit by the impact of COVID-19 on the debt collection sector, flooding events in New South Wales, and a weak national economic situation.
The administration came after CLH attempted on multiple occasions to recapitalise and restructure the business, including by selling off its debt ledger book to Credit Corp Group (ASX: CCP).
However, its connection to Volt Bank may have been Collection House’s undoing - the debt collector had a debt facility with the now-collapsed neobank, secured against its substantial investment in the company.
Collection House made an $8.5 million investment in Volt in January 2019, one day after the neobank had been given its authorised deposit-taking institution (ADI) licence. By mid-2020 the value of that investment had declined to $4.86 million, dropping further to $3.5 million by mid-2021.
Voluntary administrators John Park, Ben Campbell and Kelly Trenfield are currently conducting an independent assessment of the business, engaging with key stakeholders regarding funding options, and running an expedited sale and recapitalisation process for the company.
Bannister Law said it was interested in the events that led to the appointment of administrators as well as the collapse of the company’s share price which dived during the height of the pandemic and fell further in the subdued debt collection environment.
At the beginning of 2020, shares in CLH were trading at around $1.10 per share. Though the company is currently suspended from trading, its last price on 28 June was just $0.07 per share.
“We are also interested in the projections made by the company in November 2019,” said Bannister Law, referencing a presentation made to investors detailing the company’s outlook for FY20, prior to the impact of the pandemic on the company.
“Bannister Law Class Action is investigating the conduct of management, forecasts and representations made to investors about the company. We are particularly interested in the decisions made to sell revenue streams for upfront payments,” added Bannister Law.
“Bannister Law is looking at the company’s management in light of section 180 of the Corporations Act over the last few years. Bannister Law is also interested to hear from anyone who may be able to assist in the investigation on behalf of shareholders.”
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