"Investors in failed finance company OPI Pacific Finance meet today to consider a cash offer for their debentures and capital notes.
But a court hearing tomorrow in Australia deciding the fate of the company's parent - stricken property financier Octaviar - will ultimately have more bearing on how much cash they get back.
Octaviar - through which all the money OPI raised in New Zealand was funnelled - is offering to buy out OPI debenture and note holders for a fraction of face value.
Debenture holders who were originally owed $275 million when the company froze repayments in late January, and who have already received a 12.12c in the dollar payment, are being offered a further 25.6c in two tranches - 7.64c OPI intends paying shortly out of recent recoveries on its ragged loan book, and a final 18c on each dollar of debenture principal owed when OPI froze repayments this year. This would take their overall payout to 37.8c in the dollar.
Unsecured noteholders owed $56.7 million and who have had nothing yet are being offered 15c
While the 37.7c offer is far better than the likely outcome for investors in the likes of Capital+Merchant or even Bridgecorp, it is far from dazzling.
The alternative is to hang on to the debentures, agreeing to become a "participating creditor" of Octaviar. As well as receiving the 7.64c from OPI and whatever else it can extract from its loan book, participating creditors would, in theory at least, receive further payments from Octaviar against its "put option" with OPI.
The put option was an agreement to make good on any losses incurred on loans Octaviar arranged on behalf of the New Zealand finance company.
To date OPI has claimed A$300 million against this guarantee, and is seeking an additional A$270 million in damages from its parent for the breach of a management agreement.
Assuming things go as planned, Octaviar believes OPI debenture holders who elect to trust them could get all of their money back in the next three years. A lot depends on its ability to obtain a good price for its remaining 35 per cent stake in tourism business Stella when it is able to sell in 2011.
Things have not, however, gone as planned for Octaviar for the past year. With Allco and Babcock & Brown, it has been spectacularly derailed by the credit crunch.
Shares have been suspended since January, when they dropped 69 per cent after Octaviar said it wanted to split the company and raise A$550 million selling shares to cut debt.
Octaviar's cash offer to OPI investments is part of a A$130 million offer of partial payment to its major creditors, including Challenger Management Investments, the Australian Taxation Office, Premium Income Fund and National Australia Bank, who are between them owed about A$560 million. Total claims against Octaviar exceeded A$1 billion in late June.
Contingent liabilities include A$217 million in guarantees to entities such as Fortress Credit Corp, Bank of Scotland International and A$7 million to Hanover.
Octaviar's offer may never eventuate - the group's time may be up. The Public Trustee of Queensland, which is representing noteholders owed A$350 million, will seek to have liquidators appointed to the group in a two-day hearing that begins tomorrow in the Brisbane Supreme Court. Australian media have suggested Octaviar may choose voluntary liquidation ahead of this hearing.
If it survives, it is likely to face yet another wind-up bid from Challenger Management Investments in relation to A$100 million in unlisted bonds."
