ustralian Regulator Investigates Collapse of Opes (Update2)
By Gavin Evans
March 29 (Bloomberg) -- Australian regulators are investigating Opes Prime Stockbroking Ltd. after the Melbourne- based securities firm closed following the discovery of ``irregularities'' in some of its accounts.
The company, whose services included stock lending and stock- backed loans to investors, owes A$650 million ($600 million) to Australia & New Zealand Banking Group Ltd. and A$350 million to investment bank Merrill Lynch & Co., the Australian Financial Review reported today. Difficulties began after a number of major clients failed to meet ``significant'' margin calls, said Ferrier Hodgson, the advisory and insolvency firm that's taken charge of Opes.
Fallout from the collapse may spread beyond the 800 clients of the brokerage and its parent Opes Prime Group Ltd. after ANZ appointed Deloitte Touche Tohmatsu to liquidate the company's Australian share portfolio. At current prices, the portfolio will cover the debt, ANZ spokesman Paul Edwards said yesterday, without quantifying what's owed.
``It looks like the small investors are wearing the risk,'' said Paul Xiradis, who helps manage the equivalent of $11 billion at Ausbil Dexia in Sydney. ``In volume terms A$1 billion is not a lot for the market to absorb.''
ANZ's Edwards didn't return a call to his mobile phone today. Merrill Lynch's Hong Kong-based spokesman Robert Stewart declined to comment.
Opes directors called in Ferrier Hodgson after they became aware of a ``cash and stock movement irregularities'' in a small number of accounts, Deloitte said in a statement yesterday.
Official Investigation
The Australian Securities & Investments Commission has formed a team which will work closely with the Australian Stock Exchange and other parties involved to investigate the collapse, the commission said in a statement.
Calls to Opes offices in Melbourne, Sydney and Singapore weren't answered today.
The closely held firm, founded by Laurie Emini, Julian Smith and Anthony Blumberg, had planned to secure a listing on the Australia Stock Exchange through a reverse takeover of Reco Financial Services Ltd. The Brisbane, Queensland-state based insolvency firm canceled the agreement yesterday.
Opes customers may lose as much as A$300 million as ANZ and Merrill Lynch dump the company's portfolio cheaply to recover their loan, the Australian newspaper reported. Shares already sold include parcels in clothing retailer Just Group Ltd. and hotel operator Hedley Leisure & Gaming Property Fund, the newspaper said, without saying where it got the information.
Among the biggest declines on the Australian Stock Exchange yesterday was Admiralty Resources NL, which fell 15 percent to 20.5 cents, on trade of 20 million shares, twice the daily average the past six months.
Challenger Financial Services Group fell 15 percent to A$2, with 18.5 million shares traded, four-times the average.
The margin lending structure used by Opes, where the client didn't have a direct relationship with the ultimate lender, was unique to it, Ausbil's Xiradis said.
``It will be at least a week before we have any clear idea'' of the potential loss, Ferrier Hodgson spokesman Michael Cave said in a telephone interview today.
To contact the reporter on this story: Gavin Evans in Wellington on [email protected]. Last Updated: March 29, 2008 04:15 EDT
