Securities Commission most appropriate investigator of OPI Pacific Finance says SFO boss

By Gareth Vaughan

After an initial probe into the affairs of failed property financier OPI Pacific Finance the Serious Fraud Office (SFO) says the evidence suggests it's a more appropriate case for the Securities Commission which has its own investigation underway.

SFO director and CEO Adam Feeley told interest.co.nz the SFO had carried out an initial investigation into OPI Pacific Finance (formerly MFS Pacific Finance) after the company's receiver, PricewaterhouseCoopers (PwC) partner Colin McCloy, reported the findings of his investigation into the company - which owes about NZ$274.9 million to nearly 11,000 investors - to the SFO, Securities Commission and Ministry of Economic Development.

Feeley says that, the available evidence indicates the case might be one more appropriate for the Securities Commission to investigate. A Securities Commission spokesman confirmed OPI is among the collapsed finance companies it's investigating. An MED spokeswoman says the MED Enforcement Unit isn't currently investigating OPI.

In his third report McCloy says that PwC will support any investigation into OPI Pacific Finance's affairs and/or its directors that any of the three authorities undertakes. McCloy adds PwC is also seeking advice from its legal advisors on any actions that could be available to the receivers to pursue in relation to the conduct of OPI and its affairs, prior to the receivership.

Asked by interest.co.nz to comment further on OPI, McCloy said he would like to but couldn't. The receiver's report notes that due to the nature of the investigation and likely legal consequences, PwC is unable to provide further details regarding issues identified during its investigation. Doing so might prejudice any proceedings that might be taken by the receiver and/or authorities in New Zealand and/or Australia, the report notes.

Companies Office records now list Jason Robert Duncan Maywald of Southport, Queensland as OPI's sole director.

OPI was placed in receivership by trustee Perpetual Trust in September 2009, making it one of the bigger finance companies to fall over during the last four years. For full list of the failed companies see our Deep Freeze List here.

The receivership followed an order from the Supreme Court of Queensland's that Australian investment manager Octaviar (formerly MFS), over which OPI had a put option, be put into liquidation. OPI was previously in a moratorium from May 2008. Octaviar has subsequently become the subject of a major court case in Australia.

'Negative net assets of NZ$418 mln'

OPI has negative net assets of almost NZ$418 million based on a summary of management's unaudited balance sheet as of August 31, 2009.

As of the same date the company had net assets consisting of a NZ$33.3 million (net of provisions) loan book and a NZ$20.9 million, also net of provision, loan to OPI Pacific Investment Pty Ltd, which is secured over the latter's loan book. Receivers were appointed to OPI Pacific Investment in order to seize control of the loans and secured properties in November 2009.

Both OPI and OPI Pacific Investment hold second or third ranking mortgages.

At the date of receivership the two companies had loans outstanding to 18 borrowers where property hadn't yet been sold.

"The first ranking mortgagees have taken control over all remaining properties and many borrowers are in some form of insolvency or have been deregistered," McCloy's report says.

'Unlikely to get anything back'

"We are disappointed to advise that it is unlikely OPI will recover any material funds from properties to be sold given the losses the first ranking mortgagees are likely to incur."

Notices of demand have been issued to guarantors and borrowers with the receivers in the midst of taking legal action on a case by case basis in pursuit of loan book recoveries.

"As many borrowers and guarantors have already been placed in some form of insolvency of have been declared bankrupt there are unlikely to be material recoveries," says McCloy.

McCloy's report shows NZ$143.4 million owed to 7,361 holders of debenture stock in New Zealand, A$55 million owed to 2,514 Australian debenture holders, and NZ$57.5 million owed to 994 unsecured note holders.

OPI entered a put option with Octaviar in July 2006. It received A$20 million, as part payment, from Octaviar in relation to this in May 2008 which was distributed to secured debenture holders. McCloy has lodged a claim with Octaviar's liquidator for a further A$418 million in relation to the put option. He has also lodged a claim against Octaviar subsidiary, OCVA, which managed both the OPI and OPI Pacific Investment loans. McCloy's yet to receive a formal response to either claim.

"Due to the complexity of the receivership, the various claims being pursued and the investigations being carried out by the receivers, it is extremely difficult to estimate the return to secured debenture holders from the receivership of OPI," says McCloy.