This just in from Fairxax...

This just in from Fairxax Digital
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Macquarie goes after MFS millions
by Scott Rochfort
February 1, 2009

MACQUARIE GROUP has begun legal action against Michael King, the founder of MFS Limited, in an effort to claw back millions it lent to several private companies set up by the former chief executive of the failed Gold Coast property and tourism group.

In the latest court dispute triggered by the collapse of MFS, Macquarie is believed to be seeking the repayment of millions of dollars in margin loans made to several private companies set up by Mr King and his MFS co-founder Philip Adams.

Lawyers from both sides are expected to appear at a preliminary hearing before Justice Reginald Barrett in the NSW Supreme Court today.

Several private companies that Mr King and Mr Adams own are estimated to have taken more than $200 million in margin loans against the 13 per cent stake they held in MFS, which was worth $250 million.

It is now a little over a year since Mr King's plans to raise more than $500 million in equity for MFS backfired spectacularly - shares in the debt-laden company plunged and were later put in an indefinite suspension.

The company, which was renamed Octaviar, was put into administration in September with more than $1 billion in debts.

The share price collapse led not only to the unravelling of the billion-dollar empire, but also to margin calls.

In mid 2007 three companies held by the founders - Moonlight Australia Pty Ltd, Black Teak Pty Ltd and Australasian Investments Limited - had more than $90 million in loans, mostly in margin facilities. Virtually all of the assets in these companies are now worthless because they were held as shares in MFS.

Another company that Mr King and Mr Adams set up, Fortmore Pty Ltd, already faces another claim from one of its lenders, the Adelaide Bank. Fortmore lists Macquarie Bank as its top ranking creditor, with whom it has a $9 million liability.

In an update to Fortmore's liquidator, Raymond Richards of PPB, last June Mr King listed a further $103 million in "potential alleged liabilities" to BT Australia, Lift Capital, St George, Adelaide Bank and the NAB.

In all, Fortmore, Moonlight, Black Teak and Australasian Investments held a 13 per cent stake in MFS.

In August Mr King agreed he owed the failed margin lender Lift Capital $13.8 million. That was after Lift's administrator, Tony McGrath of McGrathNicol, sued in the NSW Supreme Court to recover $25 million it had lent to Black Teak.

Mr King and Mr Adams have dodged the media spotlight since the collapse of MFS. Mr Adams lives in Dubai, where he moved in early 2007 in an attempt to spearhead an overseas expansion for MFS.

Mr King owns two large parcels of land in Wonglepong, in the Gold Coast hinterland. One is his 230-hectare Elysian Fields Polo Estate, where he lives. It is unclear whether Mr King's company Canungra Property and Subdivisions, which owns the polo complex, is exposed.

The company co-signed one margin loan between his company Black Teak and BT Securities. The Gold Coast Bulletin reported in December that Mr King failed to sell a 113-hectare piece of land next to his polo complex, which was passed in at auction for $950,000.
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Link: http://business.brisbanetimes.com.au/business/macquarie-goes-after-mfs-millions-20090201-7uva.html