March 31, 2008 - 12:57PM While co-lender to Opes, Merrill Lynch is the culprit behind the stock dumping last Friday, things could turn nasty for ANZ.
The bank's exposure to the Opes loan book had been unsecured and it took a charge over the assets only a week before appointing its receivers from Deloittes last Thursday night.
Despite the last minute charge, the bank then began selling Opes' stock on the market on Friday morning. ANZ however sold 12% of its holdings at a discount of just 1.5% to Thursday night's close while Merrills sold about 60% of its $400 million in holdings, crunching assorted share prices along the way and sending Opes clients into despair.
Merrills has been under pressure from its exposure to the sub-prime blow up in the US and no doubt wanted to minimise its exposure to another fall in the markets
As Opes clients had pledged their assets under the Opes' securities lending arrangements to the two bankers, many believe they will not see much in return from Opes even if their loans were a small portion of their collateral.
While corporate regulator ASIC has prefered to focus on the whereabouts of Opes executive Laurie Emini, ANZ's position as secured creditor may be compromised. Under 'preferential payments' laws a charge can be rendered void if it has been made within six months of receivers being appointed. ANZ took its charge just one week before appointing receivers.
A spokesman for the bank said legal advice had been taken and it believed its charge was solid. ''We have taken legal advice on that charge and it was done for a consideration. And we believe that it was strongly positioned.''
Still, it would appear the bank has left itself open to a legal challenge from another administrator under the preferential payments laws. Opes has appointed its own administrator to the group and other creditors have the rest of this week left to appoint their own should they wish to do so.
It is quite incredible that ANZ had an exposure of $650 million to the high-risk prime broker before it took its charge last Thursday. Opes did have a close relationship with the ANZ, though, and is believed to have had regular meetings with Opes executives and would have been keenly aware of the prime broker's specific exposures.
It is understood that Opes lenders may have taken charge, or even sold stock, belonging to Opes client super funds. As super fund assets cannot be transfered to a third party, the banks are also vulnerable to legal challenge on this front.
One Opes client told Business Day that he had more than $1 million cash with Opes but had not been able to find out from the receivers whether that cash had been transfered to ANZ or Merrills. Under prime brokers' contracts all assets of the client are taken as security and pledged either to the broker or its lenders.
ASIC spokespeople have been unable to comment on the ANZ position as yet.
cheers Marny
RRS Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
