Finance company moratoriums questioned after OPI collapse

OPI Pacific Finance director Jason Maywald (right) discusses the moratorium plan with investors in May 2008. Photo / Paul Estcourt

One of the first finance companies to get a moratorium proposal approved by its investors has gone into receivership, raising questions over the success of the delayed repayment model.

OPI Pacific Finance, formerly MFS Pacific Finance, was the fourth finance company to reach a repayment agreement in May 2008 but yesterday its trustee, Perpetual Trust, said it had brought in receivers PricewaterhouseCoopers.

Since the moratorium was agreed, just 22.17c in the dollar has been paid back to debenture holders - $256.8 million is still owed to more than 12,000 debenture and noteholders.

Matthew Lancaster, head of Corporate Trust, a division of Perpetual, said the receivership was a "disappointing outcome" that had come as a result of Australian company Octaviar being placed into liquidation by the Supreme Court of Queensland.

Octaviar had a put option agreement with OPI designed to ensure it made good on any losses it incurred on loans it made using OPI investors' money. It was expected to front up with A$300 million ($368 million).

But OPI was just one of a number of creditors chasing Octaviar for more than A$1 billion.

Lancaster said it was difficult to say at this stage whether investors would get any more money.

"One of the first things the receivers are going to have to do is make contact with the liquidators in Australia."

But Lancaster did not believe the failure of the OPI moratorium could be taken as an indicator on the success of other finance company moratoriums.

"The fact that one moratorium has not worked out doesn't necessarily have any implications for other moratoriums."

Finance company commentator Chris Lee said OPI's case was completely different from any other company.

"I don't believe it should ever have had a moratorium. It should have been put straight into receivership. That is the poorest case to prove against moratoriums."

Lee said the only real asset the company had secured was the put option with the Australian company.

He believed the only way investors would get more money was through court action being taken against the directors and investment committee of collapsed investment advisory firm Vestar.

Many of the investors in OPI were clients of Vestar because of their shared parentage.

Octaviar had a 38 per cent stake in formerly NZX-listed MFS New Zealand, the parent company of OPI Pacific Finance, and owned Vestar outright.

Jason Maywald, the sole remaining director of OPI, was chief executive of MFS New Zealand and was also a director on the board of Vestar.

Financial adviser Robert Oddy believed OPI would never have received approval to enter a moratorium without the support of Vestar which could vote on behalf of its investors.

But Lancaster said the moratorium was the best approach at the time and investors would have missed out on a partial payment of the put option of A$20 million if they had not taken up the offer.

"So that was a pretty valid consideration for people to take into account," he said.

Oddy said dragging out the finance company issues through moratoriums did not guarantee investors would get all of their money back.

Moratorium-bound Strategic Finance has warned it may not be able to pay investors back in full despite initial promises. "There is still a possibility Strategic will pay out in full but no one knows what is going to happen with the property sector in the mean time."

OPI PACIFIC FINANCE

* 12,000 investors.
* Paid 22.17c in the dollar to debenture investors.
* $256.8 million still owed. OPI crashes one year after shareholders give it time to sort problems