ocv may have been insolvent in 2006

Gold Coast company may have been insolvent in 2006
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by Kerrie Sinclair

September 11, 2008 12:00am

OCTAVIAR, the Gold Coast company battling a call for its liquidation, may have been insolvent in 2006, the Brisbane Supreme Court heard yesterday.
Solicitor-General Walter Sofronoff, representing the Public Trustee of Queensland, said any court-appointed liquidator would want to "inquire carefully" into whether or not the company was facing insolvency in 2006.

He referred to the company's proposal in 2006 to raise about $348 million, its bid a short time later to raise a further $100 million from the Challenger Management Investments fund, and its subsequent plan for a $500 million rights issue.

Mr Sofronoff said the series of fundraisings in the space of about a year was "remarkable" and might suggest company directors were concerned it lacked resources to cover the $348 million originally raised.

The Public Trustee has asked the Brisbane Supreme Court to appoint a liquidator to wind up the company, which owes about $351 million to about 560 noteholders.

Octaviar, formerly known as MFS, is instead seeking to appoint its own administrator to more gradually work through its debts.

Octaviar's barrister, Malcolm Oakes, said the company ought to be able to appoint administrators to see if that process could provide better returns for investors than a formal liquidation of assets.

On the issue of whether the company was solvent, Mr Oakes said Octaviar had submitted factual statements to the court and Justice McMurdo could decide.

Prompted by Justice McMurdo to provide further guidance, Mr Oakes said the company hoped that with creditor agreement it could pursue repaying its debts but acknowledged that at some point it was likely to become insolvent.

Anthony Morris - representing OPI, one of Octaviar's major creditors - told the court it was unlikely the company was insolvent in 2006 because the financial institutions that loaned it millions would have conducted due diligence that would have uncovered any such problems.

After a two-day hearing, Justice McMurdo adjourned the case, saying he would rule tomorrow if Octaviar should be put in the hands of court-appointed liquidators or administrators of its choosing.

Justice McMurdo extended an order to 4pm tomorrow that prevents Octaviar from appointing its own administrator.

He said he expected his ruling on Friday would be either to start liquidation proceedings or to allow the company to appoint its own administrators for a period, with the process to be reviewed by the court in months.

The Public Trustee said Octaviar had failed to provide persuasive arguments that its assets could be better handled through voluntary administration than by liquidation.

Mr Sofronoff said the directors could have decided earlier to pursue a voluntary process but, until now, had "thought about" but not assembled any detailed plans.