"AFTER A bruising battle that spilled over into the Queensland Supreme Court last week, it is now up to Octaviar's creditors to decide whether to keep the embattled Gold Coast financial group afloat or put the company, previously known as MFS, into liquidation.
For most of the creditors, owed about $1 billion, agreeing to the settlement could involve accepting a loss of about 80 cents in the dollar on what they are owed, but they face an even greater loss in liquidation, according to Octaviar's new management team.
Not everyone agreed this is the best course for creditors, of course, hence the stoush.
The Public Trustee of Queensland, acting on behalf of Octaviar noteholders owed $348 million, went to extraordinary lengths to put the company into liquidation.
A hearing to have the company wound up, first set for September, was brought before the Queensland Supreme Court last week in an effort to thwart the proposed settlement. This is despite Octaviar facing liquidation if any of the six groups of creditors reject the proposal.
Opposition from other major creditors at Thursday's winding-up hearing led to it being adjourned to its original dates, starting September 9.
On the same day its attempt to wind up Octaviar was thwarted, the Public Trustee was removed as trustee for the noteholders by Wellington Capital, which manages the noteholders' investment via the Premium Income Fund.
The Public Trustee did not hide its displeasure with the decision and said it would "seek an order" to determine whether "its removal is valid".
"I just don't understand what motivated those people" said Octaviar's executive director, Chris Scott.
"The clear issue here is that liquidation is the worst option. Everyone loses from liquidation," he said.
Public Trustee officials were not available for comment on its removal, but did justify its position when the first attempts were made to wind up Octaviar in late May. The Public Trustee insisted that Octaviar defaulted on its notes with the $409 million sale of a 65 per cent stake in its leisure and travel-agency arm Stella this year.
"It is our assessment that the half-yearly accounts reveal some concerns and, in particular, the sales of assets, which involved large write-downs in book value," said the acting Public Trustee at the time, Patrick Wedge.
"The trustee is of the view that the time has come for the group's affairs to be under the control of an independent liquidator whose first duty is to the creditors, and for this process to be supervised by the court," he said in a statement. This brought the Public Trustee head-to-head with Mr Scott who staged a board and management coup in the company in May.
Octaviar, in its previous guise as MFS, acquired the Stella business from Mr Scott in 2006. He received shares, not cash, in the takeover.
Scott and the head of Wellington Capital, Jenny Hutson, insist that the Public Trustee's position is based on outdated information, with its recommendation based on a report that does not take the settlement offer into account.
"A lot has happened in the last month," said Ms Hutson. She said the trustee is calling a meeting of noteholders to discuss their views.
Octaviar needs 75 per cent of noteholders by value to support the proposal for it to succeed.
Most other creditors have already been approached, according to Mr Scott. He said the Australian Taxation Office, which is owed more than $52 million, will be approached "shortly".
While the plunge in Octaviar's fortunes has been costly for Mr Scott, he said there has been no signs of malfeasance in its undoing.
Octaviar's shares have not traded since January. The suspension is expected to continue while the company's future is in its creditors' hands."
