ASX warns shareholders to check fine print
The Australian Securities Exchange (ASX) has advised shareholders who engage in margin lending to check the fine print of their agreement in the wake of the collapse of Tricom and Opes Prime.
"It is always sensible to be informed. Ensuring investors make informed decisions is highly desirable," ASX spokesman Matthew Gibbs told Business Spectator.
Mr Gibbs said he was unaware whether any other broker currently has an arrangement with clients similar to that used by Opes and Tricom, involving the full transfer of share ownership to the broker.
"The ASX does not supervise margin lender or stock lending activities. Margin stock lending agreements are between brokers, financiers and the client."
"These deals are not part of ASX's jurisdiction – this is a largely commercial agreement."
He added that ASX only supervises brokers "in relation to the market", in accordance with legislation governing its operations.
Although margin lending agreements may have some indirect effects on trading, this did not apply to the agreement's terms, Mr Gibbs said.
http://www.businessspectator.com.au/bs.nsf/Article/ASX-warns-shareholders-to-check-fine-print-DC8KZ?OpenDocument
Third margin broker close to edge
A THIRD stock broking and margin lending group, Chimaera, is sailing close to collapse, having entered rescue talks with its financial backers about loans worth at least $500 million.
The Melbourne-based group is understood to be working with its main banker ANZ in an effort to stave off administration.
One banking source said yesterday he believed Chimaera could have "difficulty settling some of their trades over the next few days".
ANZ last month took a $500million guarantee over assets when it provided Chimaera with additional funding.
Chimaera managing director Ian Pattison did not return calls from The Australian yesterday.
Chimaera operates a similar model to those used by collapsed groups Opes Prime and Lift Capital as well as troubled Sydney broker Tricom, in which clients pledge their share portfolios as collateral for a margin loan.
Under the model, the shares are pooled by the lender as collateral for a bigger loan from banks.
In the case of an inability by the lending house to pay the bank back, the bank takes the entire share portfolio. In the case of Opes and Lift, this has led to a swift sell-down of the shares to pay back the loan, leaving margin lending clients with limited recourse as unsecured creditors.
Opes Prime administrators Ferrier Hodgson will issue a report to the company's creditors at the end of the week.
They are targeting an April 29 meeting to tip the group into liquidation.
Administrator John Lindholm said there had been no change on the view that creditors would get "up to" 30c in the dollar return.
"The sooner we can get Opes into liquidation the better, as we have stronger powers," Mr Lindholm said.
These powers include exploring preferential deals, such as those allegedly given to a number of favoured clients including Sydney lawyer Chris Murphy.
Opes finance chief Tony Iremonger did not return calls but Mr Lindholm said he was co-operating with the administrators and receivers and was not suspected of any wrongdoing.
The ANZ continued its Opes share sell-down yesterday and is now understood to have sold about 60 per cent of its $650million share portfolio.
ANZ has said it does not expect any material losses from its dealings with Opes or any other clients in the sector but has quadrupled its bad debt provision to almost $1 billion to weather the growing financial meltdown.
ANZ chief executive Mike Smith said yesterday he was spearheading an internal review into the bank's securities lending business, and its involvement in the collapse of Opes Prime.
http://www.theaustralian.news.com.au...35-643,00.html
Volatile market catches Tolhurst
ANOTHER stockbroker has been caught breaching capital liquidity requirements, because of increased market volatility.
http://business.smh.com.au/volatile-...0505-2b4m.html
Most Opes clients continue to go backwards
- Leonie Wood
- August 19, 2008
FIVE months after Opes Prime Stockbroking collapsed owing share investors about $520 million, the vast majority of its clients appear to be worse off.
Calculations handed to the Federal Court yesterday show that of 464 client portfolios analysed by Opes Prime's administrators in recent days, about 70% have dropped in value since March 27, when the company sank into administration.
The clients' positions have deteriorated because shares they deposited with Opes Prime — in most cases, as collateral for loans to buy more shares — have continued to slide.
The clients remain exposed to share price fluctuations even though most of the shares, valued at $1.6 billion, were seized and sold by Opes Prime's financiers, ANZ and Merrill Lynch, which exercised their rights under share-lending contracts with Opes.
One client who was owed $24.7 million at March is entitled to claim only $2.4 million, based on share prices measured on August 16, because the shares underpinning that person's portfolio had plunged.
Another client owed $1 million in March has been flipped into the role of debtor and now owes Opes $174,546.
Others have swung from being net debtors to net creditors and back to debtors, while about 100 are entitled to claim more from Opes Prime than when the debacle began.
Only a few dozen Opes Prime clients have issued the firm with a notice of default, an event that freezes the value of their debt.
Opes Prime's administrators, John Lindholm and Adrian Brown of Ferrier Hodgson, yesterday asked Justice Ray Finkelstein to determine exactly which day they should draw a line through Opes' books to determine how much is owed.
It is a crucial question because the value of a creditor's vote at a meeting is directly proportional to the amount he or she is owed. When creditors meet again, most likely late next month, the administrators are expected to ask for the company to be liquidated.
Under the Corporations Act, the value of debts is determined the minute an administrator is appointed, but the Payments Systems and Netting Act of 1998, which covers the settlement of transactions in financial markets, appears to override the Corporations Act.
The Netting Act refers creditors and debtors back to their contracts to identify certain issues such as events of default or rule-off dates. In an earlier judgement this year, Justice Finkelstein ruled that, for the purposes of interpreting Opes' contracts, the appointment of an administrator was not the same as appointing a liquidator.
But counsel representing the administrators, ANZ and two sets of Opes creditors all argued yesterday that Opes' date of administration, March 27, should be the rule-off date — not a future date when a liquidator takes over.
They are concerned that if the default date is when Opes goes into liquidation, there is a big risk that investors might try to manipulate share prices to boost their vote in a creditors meeting.
http://business.theage.com.au/busine...0818-3xpj.html
Tricom lives.........for now
As an interesting diversion, the greatest mystery in modern-day Australian banking remains unsolved. That is the relationship between stockbroker Tricom, Babcock & Brown and ANZ.
You have to hand it to Tricom chief Lance Rosenberg, whose survival efforts make Lazarus look like a quitter. But why is it that - and ANZ still had nothing to say on this matter yesterday, having claimed to have cleaned up its stock lending mess last month - Tricom is still alive?
Tricom had assisted B&B in numerous ways during the halcyon days, including providing B&B executives and staff margin loans against their various B&B stable holdings.
It also provided substantial assistance to B&B in its takeover of Alinta by offering clients margin loans (believed to be non-recourse) on their Alinta stock provided they accepted the B&B terms.
These terms are part of the reason that Tricom margin lending ended up with so much of the B&B satellites in the margin lending account
While B&B flirts with death, ANZ has apparently funded former executive and head of B&B Capital, Rob Topfer, into a recapitalisation of Tricom. The irony is that B&B had closed down its corporate finance business as part of its recent restructuring but now appears to have set up Tricom as a corporate finance shop, thanks to Topfer and ANZ.
It seems B&B, Babcock Communities and Babcock Capital may pay Tricom to unwind the Babcock deals for which Topfer was originally responsible. Why didn't they just keep him on?
Will there be a fee rebate for savaged shareholders of B&B, BCM and BBC for unwinding these deals?
Nice work by Rosenberg and Topfer. There is still $80 million in the Tricom margin lending book that needs to be unwound.
But the big question remains, what is ANZ hiding? Does it relate to the failure to deliver Allco stock in January when Tricom blew up? The claw-back of stock from the dying Opes Prime perhaps? A deal arising from the shift of part of Tricom's loan book to Opes in February?
Who knows, apart from Rosenberg and ANZ? Still, Lehman might be gone but Tricom still lives!
http://business.smh.com.au/business/...0917-4ijg.html