Scrap heats up for share of $18.5 million finance settlement

The Australian subsidiary was claiming close to $20 million at the time of Capital + Merchant's receivership. Photo / File

US fund may jump ahead of long-suffering investors in Capital + Merchant Finance.

The Australian wing of a United States investment fund could swoop in front of Capital + Merchant Finance investors and take a chunk of an $18.5 million settlement.

Capital + Merchant's 7500 debenture holders, owed $167 million when the firm collapsed in 2007, have waited seven years for some good news on recovery.

They finally got some in June, with the failed firm's liquidator announcing an $18.5 million out-of-court settlement with the company's former auditors BDO Spicers. The settlement was made without any admission of liability on BDO Spicers' part.

Les Currie, the Official Assignee at Hamilton and liquidator of the firm, said at the time that the settlement was a milestone and was for "the ultimate benefit of the investors".

There is still, however, no certainty on when or how much will be available for investors and the OA said it was "currently reviewing a number of competing claims to the [settlement] funds". These claims may rank ahead of the investors, the OA said.

One is from Australia's Fortress Credit Corporation, which is a branch of US-listed Fortress Investment Group - a global giant with US$66 billion ($84.8 billion) of assets under management.

The Australian subsidiary was claiming close to $20 million at the time of Capital + Merchant's receivership and according to the latest available report is still owed $1.8 million.

Another claim which could rank ahead of investors is from Perpetual Trust and is for fees, the OA said.

Perpetual was Capital + Merchant's trustee but was removed from this position pending a lawsuit from the firm's receivers alleging a breach of duty. These proceedings were due to go to court this year but were put off. Receiver Brendon Gibson said on Friday that no settlement had been reached.

The case is the first time receivers of a failed finance firm had gone to court to pursue recovery from a trustee company, which is tasked with protecting the interest of investors.

The action is being funded by a litigation financier, which is paying legal fees for the case in exchange for first rights to any payout.

C+M Finance
*Collapsed in 2007 owing 7500 investors $167 million.
*Two directors of C+M serving longest jail sentences handed out to finance company bosses.
*C+M's liquidator reached $18.5 million settlement with firm's auditor this year.
*Unclear what return in the dollar investors will get.