Anz Bails Out Chimaera With $55m

Sydney Morning Herald

Thursday April 24, 2008

Colin Kruger and Danny John

ANZ Bank has bailed out the embattled financial services provider Chimaera Capital, saving the bank from being associated with another failed margin lender less than a month after the Opes Prime collapse.

ANZ and Chimaera announced yesterday that the bank would inject $55 million into the firm - a combination of new loans and cash - as part of a $65 million capital raising by Chimaera that would give the bank a majority stake in the group if it passed due diligence.

The move echoes ANZ's Tricom rescue this month, offering $5 million as part of a $30 million rescue package for the broker which had its solvency questioned after failing to settle trades on January 29. ANZ would not reveal its total exposure to Chimaera, but the bank has a $500 million secured charge against the assets of Chimaera's business.

In a statement, Chimaera's co-founder, Sal Catalano, said: "Chimaera has been the subject of unfounded media speculation about its securities financing business." The statement also said "the additional funding would enhance Chimaera's liquidity during current volatile equity market conditions. "

It was the first statement from the company since the media speculation questioning its viability. Chimaera officials were not returning calls last night.

It is understood Mark Mentha, of the corporate recovery group Korda Mentha, is helping Chimaera to restructure its operations. Chimaera, Opes, Tricom, and another failed margin lender, Lift Capital, all shared a high risk margin loan business model that came under pressure with the sharemarket falls earlier this year.

The news adds to questions over the future of ANZ's controversial securities lending operation after ANZ's chief executive, Michael Smith, indicated yesterday that the bank should never have been involved in a business so closely linked to the collapsed stockbroker Opes Prime.

Mr Smith, who has taken charge of the internal investigation into the banks relationship with the failed broking firm, yesterday expressed his frustration at how much the Opes affair has damaged ANZ's reputation.

"Should ANZ have been in this business?" Mr Smith asked rhetorically having been prompted about the securities lending units involvement with Opes. "Quite clearly not."

"The size of the problem is very little but in terms of reputation it is huge," he said. ANZ is pursuing the recovery of a $95 million financial lifeline that was advanced to try to keep the broker going in its dying days, as well as taking control of a $919 million portfolio of stock which it now selling down amid much controversy to cover loans totalling $650 million.

The legal fallout over whether the bank had the right to seize the shares and offload them has been a distraction for the management. Mr Smith said if it had not been for the irregularities in several of Opes's customer trading accounts, which subsequently brought the firm down, ANZ would still have been working with the firm to resolve its difficulties.

Annoyed that the bank is being blamed for the broker's problems when he believes they were self-inflicted, Mr Smith said: "The position is very unpleasant and I am frankly very pissed off about it."