Giant US fund hit in MFS wind-up LEO SHANAHANThe...

Giant US fund hit in MFS wind-up

LEO SHANAHAN
The Australian
December 03, 2012 11:00PM


NEW York-based investment vehicle Fortress Investment, whose board of directors includes Richard Haas, one of the grandees of the US foreign policy set, has had almost $190 million worth of its Australian assets frozen after a complaint by the liquidators of the failed Gold Coast investment group MFS.

The Supreme Court of Queensland last month ruled in favour of the liquidators for MFS -- now called Octaviar -- who had argued that Fortress had received preferential payments from MFS while it was insolvent.

This follows a successful action by liquidators to obtain a "Chapter 15" in a New York court, which would give them the right to pursue Fortress for assets in the US.

Ten thousand investors, mostly elderly, lost about $700m when the MFS-founded Premium Income Fund collapsed in the global financial crisis, with the company now owing $2.4 billion to creditors.

According to the freezing order made by judge David Boddice on November 9, Fortress would be prevented from selling assets or removing property in excess of $190m from Australia.

Fortress in Australia could not be contacted for comment. Fortress, which has $US51bn under management, was co-founded in 1998 by some of the biggest names in US finance, including Robert Kauffman, Randal Nardone and Wesley Edens. Dr Haas, listed on Fortress's website as an independent director, is the president of the Council on Foreign Relations and was a principal adviser to former secretary of state Colin Powell.

Liquidators William Fletcher and Katherine Barnet of Bentleys Corporate Recovery also aim to recover another $19.7m payment made in December 2008 from Octaviar to Fortress, two months after MFS was put in voluntary administration in September 2008.

Interest on the repayments is also being claimed by the liquidators, meaning, if successful, the final return could be more than $210m.

The repayments made by MFS to Fortress between February and December 2008 were funded through the sale of its hospitality arm, Stella, to the private equity CVC Group the same year. In their statement of claim filed against Fortress, the liquidators allege that Fortress "conspired" to receive the preference payment with former Octaviar directors David Anderson and Craig White -- who are also listed as defendants in the case -- despite the firm being in dire straits.

"Between around January and February 2008, Fortress received a large amount of information about the cash position and solvency of OA (Octaviar Administration) and OL (Octaviar Limited), the financial position of the Stella Group (including, but not limited to, inter-company loans), and the CVC proposal and the Stella share sale agreement," they claim. "The plaintiffs contend that Fortress aided, abetted, counselled or procured the contraventions within the means of section 79(a) (of the Corporations Act), has been knowingly concerned in, or party to, the contraventions . . . and, or alternatively, has conspired with Mr Anderson and Mr White to effect the contraventions."

Fortress recently failed in a bid to have the freezing order thrown out in the NSW Supreme Court, arguing it had been "prejudiced" by the terms of the liquidators law suit.

In a judgment late last week, judge Ashley Black rejected the Fortress claim that it had been "prejudiced by loss of memory, loss or documents or the passage of time" as "unsupported by evidence".ends


http://www.theaustralian.com.au/business/financial-services/giant-us-fund-hit-in-mfs-wind-up/story-fn91wd6x-1226529248613#
************************************

Did anyone post these details/news because I havent noticed them put so succinctly anywhere else but i might have missed HC posts a year ago.


I notice this point made by Bethany Mclean journalist of some note..ie Enron..
titled The great Hangover or over the hedge
http://www.vanityfair.com/politics/features/2009/04/fortress-group200904-2

dated 2009 (and covered before I think...This line interested me this time)

"But, for now, it appears that the principals are sticking together. Fortress’s filings note that several of its funds have “keyman” provisions, meaning that if one or more of the principals ceased to be actively involved in the business, that could give investors the right to get their money out—and, in the case of some of the hedge funds, might result in the acceleration of the debt."cont.
******************************
interesting provision? opens the gate ?

and old news...
http://www.bloomberg.com/news/2012-12-24/fortress-investment-says-co-founder-robert-kauffman-to-retire.html

Fortress Says Co-Founder Robert Kauffman to Retire

By Alexis Leondis - Dec 25, 2012 4:59 AM GMT+1000

last paragraph states
" Prior to Fortress, Kauffman was a managing director of UBS AG from May 1997 to May 1998, and before that, was a principal of BlackRock Inc. (BLK), according to a biography posted on Fortress’s website. Kauffman has held a variety of roles at Fortress and previously led its European private-equity business. "

*******************


I havent read more recent news along these lines...
has anyone?

I still dont fully understand hedge funds....
shorting stocks I follow, but funds of funds etc are beyond me..and are they sort of private equity in the shape of a fund but earn added profits for making investors profits...

so was mfs acting like a hedge fund creating funds and claiming management fees? were there funds of funds? a species I dont understand.
Was Fortress hedge fund at war with MFS (hedge)/ fund ?...a general concept that bethany mentioned and I dont follow at all.
but fortress were
portrayed as a first mortgagee/lender/investor/creditor? in NZ to Capital and Merchant liquidation dec 2007
and
when MFS halted trading after....a big quick selloff of shares...they were due in feb 2008 for that big debt over some part of MFS requiring refinancing?
They were in lender role it seems to me, as a listed hedge fund..right?

I still think a broker is the guy needed to help follow this....

I must have missed the latest developments on this and have been preoccupied with PIF saga which is very important to so many individuals...

Step back now, for a clearer BIG picture, some-one who knows/understands what they are looking at, I say.

There must be many who could do that but unfortunately I
dont have the expertise...for this type of vision.