Two Milestones On A Long And Winding, Crowded Road

Sydney Morning Herald

Friday May 30, 2008

Michael West

Opes Prime's administrators are believed to have had an approach from ANZ Bank for a settlement deal which would deliver a 62c-in-the-dollar return to Opes unsecured creditors and relinquish any legal claims the administration might pursue against the bank.

Sources close to the negotiations between administrator John Lindholm of Ferrier Hodgson and ANZ executives said the administrators had not agreed to the 62c figure and there remained significant terms and conditions to be discussed.

Were the approach to become a formal offer, which was accepted Lindholm, the administrator would still have to put it to Opes's 1200 creditors to decide.

ANZ said no agreement had been reached. "The talks between ANZ and the administrator are exploratory and preliminary and no specific solutions have been discussed," said bank spokeswoman Cherelle Murphy.

Administrator John Lindholm said, "I can categorically state that no offer has been referred from the ANZ". He declined to respond in detail to whether there had been an informal approach or what figures had been mentioned in negotiations. He later issued a statement saying no offer from the ANZ had been received or discussed and that preliminary exploratory discussions with the bank were continuing.

It is believed the proposal would not include an agreement to release ANZ from any legal claims which might be taken by unsecured creditors themselves.

However, it would release the bank from claims made by the administration and therefore by Opes's companies.

Lindholm and ANZ had agreed last week to negotiate on a deal for Opes's hapless unsecured creditors, as revealed in Business Day.

These discussions coincided with a suppression order on the Herald, The Age and this reporter restraining publication of leaked documents.

The talks, however, only involve two of the relevant players in the Opes Prime saga. Apart from the Opes administrators and the ANZ, there is the collection of Opes unsecured creditors. Some are making claims individually and others via class action lawsuits.

If Lindholm can achieve a settlement for Opes companies, their unsecured creditors would benefit as they currently face losses of more than $1 billion and the prospect of zero return.

Last week an ANZ spokesman, Paul Edwards, said about 90 per cent of the bank's $710 million loan exposure had been sold and ANZ would continue to sell despite the negotiations.

The remaining portion of the loan book is comprised of relatively illiquid securities which the bank is struggling to sell without driving stock prices sharply lower.

At the demise of Opes in late March, there was about $900 million of share collateral against $650 million in security.

John Lindholm has said he expected to report to creditors by June 23, giving the parties one month to find an outcome. ANZ has been non-committal on a time frame.

Lindholm said that if a deal had not been struck by June 23, but progress made, the parties could go back to the court to get an extension to the convening period.

If not, he said, Opes would probably be put into liquidation. In that event, Opes's assets would be sold, with banks and other secured creditors getting the lion's share and unsecured creditors left with little, if any, return.

The most likely outcome if a deal was struck would be an agreement by ANZ to fund a deed of company arrangement (DOCA) at an agreed level. The bank would demand a release from litigation by Opes companies in return for cash.

As noted last week, the next step would be more complex because the unsecured creditors' actions sprouting up would not be extinguished by a DOCA.

Bringing this collection of creditors into the fold for negotiation - and for the bank a potential release - would be tricky and time-consuming.

Many are gunning for 100c back in the dollar, plus damages, for being misled by Opes and ANZ, and for the claim that Opes owed money to ANZ and had given shares as security for that debt. ANZ claims it has title to the shares and provided money to Opes as security for those shares.

While ANZ's willingness to talk was one step along that long and tortuously winding road to a negotiated outcome, yesterday's offer of 62c in the dollar is another one.

mwest@fairfax.com.au

Go to smh.com.au/businessday for Michael West's comments throughout the day.