interesting days ahead

James Packer-backed Challenger may be key for Octaviar HeraldSun 28 May:::NATIONAL Australia Bank may move to appoint an administrator to teetering Gold Coast property financier Octaviar if $40 million is not received by the close of business today.

Last month, Octaviar told the ASX it may collapse because it owes $838 million to six of its biggest unsecured creditors.

Other creditors of the company, formerly MFS, are also lining up, with the James Packer-backed Challenger group launching legal action to recover $100 million and the Public Trustee of Queensland demanding $350 million.

Octaviar's best chance of avoiding administration appears to lie with another part of Mr Packer's empire, Hong Kong-based fund Arctic Capital.

Arctic Capital is negotiating to purchase $63 million of debt from another former MFS company, Living and Leisure Australia.

A $40 million tranche of that debt was guaranteed by MFS, sparking the latest crisis.

NAB spokesman Brandon Phillips said that if LLA repaid its debt, the bank would have no need to pursue Octaviar for the guarantee.

It is believed Octaviar has more than $200 million in cash, meaning it could easily pay the bank, but has not obtained the agreement of other creditors needed to make the payment.

NAB served Octaviar with a statutory demand for the $40 million on May 7, but Octaviar only told the stock exchange of the notice yesterday.

Under corporate law, if a creditor's statutory demand is not paid by a company - or set aside by a court - within 21 days, the creditor can launch legal action to have the company put into administration.

The 21-day period expires today.

Mr Phillips would not rule wind-up action in or out: "We'll keep thinking about our options and take appropriate steps once we see the outcome."

The Living and Leisure Australia recapitalisation proposal has a strict debt repayment timetable.

As part of the deal, LLA told the ASX it "must provide satisfactory evidence to NAB that it has a signed credit approved offer for a lending facility . . . sufficient to repay NAB's debt in full" by this Friday, and pay the debt in full by Friday, June 13.

Representatives of LLA and Arctic Capital declined to comment.

Octaviar is poised for a NSW Supreme Court showdown with Challenger on July 21.

Challenger has taken action on behalf of its $1.65 billion Challenger High Yield Fund, which owns $100 million worth of unlisted floating rate notes - a form of debt - issued by Octaviar.

Challenger spokeswoman Lynn Anderson said: "(Challenger subsidiary) CIML is seeking to enforce the rights of the loan agreement on behalf of unit holders in the Challenger High Yield Fund."

She declined to comment on the reasons for the action, but it is believed Challenger will allege the sale of 65 per cent of Octaviar's tourism arm, Stella, in February, means the debt is due and payable.

Challenger is believed to argue that the sale was a "trigger event" because the information memorandum sent out by the then-MFS said the notes were guaranteed by MFS and its subsidiaries, including Stella.

The Public Trustee of Queensland, which represents investors in listed Octaviar notes, joined the claim rush on Friday, serving the company with a notice of event of default.

Acting Public Trustee Patrick Wedge did not explain the nature of the default in a statement issued yesterday.

"As trustee for the note holders, this office is acting consistent with our duties under the trust deed," Mr Wedge said.

"This office will take all necessary steps to protect the interests of the note holders."

He said the company has until next Thursday to respond to the notice.

Octaviar stock is not trading on the exchange, but Living and Leisure stock recently relisted on the back of Arctic Capital's proposal.

The ASX is investigating why Octaviar took so long to disclose the NAB's demand to the market.

ASX spokesman Matthew Gibbs said the fact the Living and Leisure debt was guaranteed by Octaviar was one reason "why we'll take a close look at it."

An Australian Securities and Investments Commission spokeswoman declined to comment.

Octaviar company secretary David Anderson could not be reached.