iPartners aims to take control of failed lender Salt & Lime, which owes it $42m

Private credit company iPartners is looking to take control of failed lender Salt & Lime, which collapsed owing more than $50m earlier this year.

Salt & Lime founder Will Kiln.

Private credit firm iPartners is seeking to take control of failed personal loan funder Salt & Lime, which collapsed in June owing creditors more than $50m.

More than $42m of that sum is owed to iPartners, which stood behind the loan book of the Sydney-based company, founded by directors Will Kiln and Morris Grenfell.

The lender’s model involved extending personal, car and debt consolidation loans to customers and offering interest rate discounts if they completed financial literacy education modules.

The company’s administrator, PwC’s Daniel Walley, found that the group had lost money for the past three financial years, and the operating entity, Salt & Lime (SL) may have traded insolvent from June 30, 2023, and related company Salt & Lime Funding (SLF) from June 11, 2024.

Publicly available information indicates iPartners made an initial $32m available to Salt & Lime to fund its loan operations, which was extended to $100m in May this year.

The initial creditors’ report says iPartners appointed receivers over the companies after “it was brought to iPartners’ attention that various inter-company loans had been advanced from SLF to SL, which potentially included capital funds which were to be retained by SLF for repayment of iPartners debts’’.

It appeared, the first report said, that loan funds may have been used for operations.

A deed of company arrangement (DOCA) over the two companies, under which creditors will receive about 3c in the dollar for each entity, has been proposed by iPartners.

It is the largest creditor by far, owed $42.5m, while $7.3m of the debt owed by SL is a related party debt to SLF.

The directors had proposed their own DOCA in a bid to take back control of the companies, according to the most recent creditors’ report, lodged with the corporate regulator in recent days.

“Given the DOCA proposal required the support of iPartners (who, as largest creditor would have a majority vote at the creditor meetings), the administrators requested the directors confirm whether iPartners had agreed to the proposed DOCA,’’ the report says.

“The confirmation of the directors and/or their DOCA proposal has not been forthcoming. However, the administrators understand iPartners has rejected the draft DOCA proposal put forward by the directors.’’

Earlier this month iPartners submitted its own DOCA proposal, which creditors will be asked to vote on at a meeting on September 23.

“The deed proponents have stated that the purpose of the SL DOCA is to allow SLF to continue to trade on a solvent basis following the effectuation of the SL DOCA and for SL to be wound up after the deed funds are distributed to creditors,’’ the new report says.

“We consider the SL DOCA provides for a better return to creditors than would be achieved by an immediate winding up of the companies.’’

The report also says that the administrators calculated that an insolvent trading claim of up to $7.2m could be brought against the directors should creditors decide to fund such an action – an unlikely outcome given iPartners’s DOCA proposal, which would result in the ability to bring any such claim being nullified.

“A significant quantum of the estimated debts incurred by SL while it traded insolvent concern $6.9m of inter-company funding,’’ the report says.

“SLF has lodged a claim over in SL for this amount. This insolvent trading claim is a high-level estimate, and a liquidator would be required among other things to review the cash flow and balance sheet position of SL during the relevant period, in conjunction with creditor claims in order to determine the timing and circumstances giving rise to the creation of the debts.’’

IPartners told The Australian: “In proposing the DOCA, iPartners is seeking the best return for its secured creditors’.

“In the short term, the intention is for iPartners to step in and run down the book, primarily as the net interest margin the loan book is generating is of value to the secured creditors, and costs of receivers and administrators will be saved,’’ the firm said.

“In the medium to long term, all options are on the table, including a potential sale of the business and assets as a whole or the loan book in isolation.

“IPartners also intends to continue to explore other potential recoveries, such as claims against the current and former directors.”

PwC said in its first report that when administrators were appointed SL had about 2200 customers on its books and debts of about $8.1m, $7.3m of which was owed to SLF, while SLF had debts of $42.6m, virtually all owed to ­iPartners.

The report says while the company experienced substantial growth, both companies continued to run at a loss and a service agreement between the two entities was never entered into.

It also appears, PwC says, that the directors paid themselves each $225,000 in bonuses, but structured them as loans.

“It is unclear why the payments were structured in this way, and there is no supporting documentation related to the transactions,’’ the report says.

The directors were each being paid $388,500 per year and their spouses were paid $277,500 each.

The directors could not be contacted.