Fendal, owned by former Dunedin businessman Gray Ussher, has been placed in voluntary liquidation owing $17.1 million to at least 28 creditors with estimates of a $10.5 million shortfall.
The Fendal liquidation decreases the potential payout to already financially stressed Hurricane investors.
In February, private investment and finance company Hurricane House, of Dunedin, owned by Paul Nicholson, was placed in liquidation, owing almost $8.5 million to 50 mostly southern investors.
Local investors, some of whom have family homes at risk, found out only in March the $4.5 million loan was unsecured, but now they must join a queue of creditors owed more than $10 million by Fendal.
Mr Ussher, once a Dunedin-based finance company director, was the sole director of Fendal Finance Ltd and through sole ownership of registered company MUL Management Ltd was effectively 99% shareholder of Fendal.
Hurricane's largest loan was the $4.5 million to Fendal, which, in an exceptional state of affairs, was not secured against any Fendal assets, Insolvency Management Ltd liquidator Gus Jenkins said when contacted yesterday.
"Not having the debt secured is not the best position to be in," said Mr Jenkins.
He has described the unsecured $4.5 million loan as "high risk" and a "major exposure" for investors.
Several Hurricane investors have spoken to the Otago Daily Times with concerns about where their investments went.
Mr Jenkins declined to estimate any potential payout to Hurricane investors, saying only a bank as a secured creditor had been paid $360,000.
"What's available now for [Hurricane] investors will be dependent on the Fendal liquidator," Mr Jenkins said.