Octaviar close to collapse * Michael West * May 27, 2008 -...

Octaviar close to collapse


* Michael West
* May 27, 2008 - 9:18PM
*

Gold Coast financial engineer Octaviar, or MFS as it was known, is a hair's breadth from collapse with its major noteholder Challenger Managed Investments and the Public Trustee of Queensland demanding immediate repayment.

Both the Trustee and Challenger served legal notices on the embattled Octaviar.

If the courts rule in their favour, it will be the end of the road for Octaviar, which counts most of its value in the Octaviar Premium Income Fund.

Challenger, with $100 million - at face value - in bonds that mature in November 2011, is claiming that Octaviar is in default and is suing for immediate recovery of its money. A trial date of July 21 has been set.

Meanwhile, the Public Trustee of Queensland, who acts for investors in Octaviar's listed notes - whose face value is $349 million - has also served a notice claiming a default. Until now, the Trustee had been negotiating with Challenger on behalf of Octaviar. That it has now claimed a default suggests something must have gone wrong between the Trustee and Octaviar.

Octaviar would appear to have a reasonable case as the notes are unsecured and are not due for repayment until 2011. The claim by Challenger, and presumably the Queensland Public Trustee, is that the sale of Octaviar's interest in hospitality group, Stella, constitutes a default as this was the sale of a major stake in a key asset.

Challenger and other Octaviar investors are understood to be unhappy that the Responsible Entity (RE) of Octaviar's most valuable asset, the Octaviar Premium Income Fund, has been delivered to an associate of the recently appointed executive director and biggest shareholder Chris Scott.

Wellington Capital is the RE for OPIF and it is also Scott's financial advisor.

Meanwhile, Octaviar also faces a demand for payment from National Australia Bank, which has asked for payment of a $40 million guarantee which NAB had provided to Living and Leisure Australia Group.

Even if Octaviar were to bat off Challenger and the Queensland Public Trustee in court in July its future would be uncertain.

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from The Age website.