opes prime clear for settlement vote.

Opes creditors clear for $254m settlement voteLeonie Wood
June 24, 2009
THE Federal Court has cleared the way for Opes Prime creditors to vote on a $254 million settlement offered by ANZ and Merrill Lynch, but a judge has expressed concerns about some aspects of the proposed deal.

In a late ruling yesterday, Justice Ray Finkelstein told a packed courtroom in Melbourne that he had come to a "clear view" that schemes of arrangement, such as that proposed by Opes Prime's liquidator, which require creditors to surrender their rights to sue its former financiers or third parties, could be done in Australia.

It is not the first time such a scheme has been proposed here, but it is the first time the issues have been fully contested and argued in court.

But Justice Finkelstein warned Opes' liquidator, John Lindholm of Ferrier Hodgson, that, assuming Opes' creditors approve the deal at meetings next month, when the scheme returns to court for final approval he would scrutinise it closely to determine if it was fair.

"There is no part of the scheme that is so unfair that I would not approve (it) regardless of what the creditors resolved," the judge said. "But that is not to say there may not be serious problems with the scheme of arrangement on the question of fairness."

In particular, the judge pointed to two pools of funds, one of $8 million, from which the liquidator will extinguish legal claims against the banks, and the other of $3.5 million, to be paid at the liquidator's discretion to anyone whose legal claim played a persuasive role in forcing the settlement.

Of the latter pool, $1 million has already been earmarked to pay the financier behind a class action initiated by Slater & Gordon against ANZ, which the liquidator believes was instrumental in getting the banks to settle.

The judge said he was "worried about the criteria that has been chosen here for payment of, in fact, some creditors' legal costs and not others … I do not doubt that one motivating possibility was ASIC's announcement early in the year that it was investigating the conduct of the banks … that's a great motivation for settlement."

The judge also said it was "not a trivial issue" that some creditors would surrender legal action they had already initiated against the banks. He said while it might not be possible to value these claims, it would have to be considered in assessing the fairness of the scheme.

Justice Finkelstein wants Mr Lindholm to split the voting creditors into two classes, one representing Opes' 600 or so client creditors, who are owed about $630 million, and the other representing trade creditors of the failed share-lending firm, who are owed about $5 million.

The liquidator must first hold an explanatory meeting for all creditors, followed by separate meetings of the two classes. Importantly, the judge did not recommend, as one group of creditors had urged, splitting the client creditors into sub-classes comprising those who had initiated legal action against the financiers and all others.

Opes Prime collapsed in March last year, triggering pandemonium in the sharemarket as ANZ and Merrill Lynch seized and sold $1.6 billion of shares that Opes had deposited with the financiers.