is this selling due to opes prime fiasco, page-43

Rush to liquidate failed broker
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April 4, 2008

ADMINISTRATORS to the failed broker Opes Prime say they will recommend that it be put quickly into liquidation when they meet creditors next week, giving them additional powers to investigate the collapse and reverse share transactions.

While the administrators, Ferrier Hodgson, are still tallying up the financial damage at Opes before Tuesday's creditors' meeting, the future of the failed stock financing specialist looks pretty clear.

"My current thinking is it's in the creditors' best interests to put the company into liquidation as soon as possible," said Ferrier Hogdson's John Lindholm, one of the Opes administrators.

Mr Lindholm said the prospect of the company being salvaged via a deed of company arrangement was extremely unlikely.

As liquidator, Mr Lindholm will have extra powers to investigate the collapse of Opes Prime and its related companies and reverse transactions "if there is good legal grounds to do so".

A liquidator also has more powers to investigate directors' activities before the company was placed into administration and to establish grounds for possible legal action against office holders.

Such action could form one of the few viable avenues left for unsecured creditors unless court action against Opes's financiers, including ANZ Bank, determines that the banks do not have legal title to the $1.3 billion share portfolio they are selling off.

Yesterday afternoon CMG Group failed in an attempt to get a Federal Court injunction against the further sale of its shares by ANZ Bank.

However, on Wednesday a NSW Supreme Court judge granted an injunction blocking ANZ from dumping shares in the Perth iron ore explorer Gindalbie Metals.

Justice Paddy Bergin said statements about lending agreements on Opes's website appeared to contradict the contracts signed by its margin lending clients. She added that Opes's Global Master Securities Lending Agreement was "not a straightforward document".

"It does appear there were agreements between the plaintiff and Opes whereby the plaintiff was entitled to retain the beneficial ownership of the stock," she said. "I regard it as a serious issue to be tried."

Mr Lindholm said the ANZ cases "will go a long way to fleshing out the issues around transfer of title".

The share portfolio was Opes Prime's most significant asset and its clients' claims on the portfolio accounts for the vast bulk of unsecured creditors' claims.

If the court decides legal title to the shares never left the 1200 or so Opes clients, then the three banks that acted as financiers - ANZ, Merrill Lynch and Dresdner Kleinwort - will have to hand back all proceeds from the share sales.

The three banks would then face huge losses as they make claims against a vastly reduced pool of assets. ANZ and Merrill Lynch have loans totalling more than $1 billion between them.

If the bank's legal title to the shares is upheld, Opes creditors will largely be dependent on the three banks generating a surplus after paying down their loans from the proceeds of the sale.

Chris Campbell of Deloitte, who is acting as one of Opes's receivers, said he was "quietly confident" there would be a surplus when the sale is complete.