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Coverage of the second day of examinations by the liquidator:
SMH http://www.smh.com.au/business/gold...-had-faith-in-failed-firm-20101216-18z3f.html
Gold Coast property chief had faith in failed firm
December 16, 2010 - 3:19PM
The head of a major financier of collapsed Gold Coast property group Octaviar trusted the company could repay a major loan within a week, and didn't question the source of a $100 million repayment.
Fortress Credit Corporation chief David Kelleher on Thursday continued his evidence into the company's 2008 failure.
Previously known as MFS, it collapsed owing about $2 billion to creditors, including Fortress.
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Lawyer for the liquidators Kylie Downes on Thursday used hearings in the Brisbane Magistrates Court to focus on a Fortress loan to one of the companies in the Octaviar group known as Castle.
It was extended twice before it was repaid in February 2008, from the proceeds of the sale of Octaviar's Stella travel business.
Fortress itself had previously considered buying Stella and analysed its value after debts, but did not proceed.
MFS sold 65 per cent of the business for about $400 million in February 2008 to private equity firm CVC Asia Pacific.
Mr Kelleher said he was not concerned when Octaviar decided to defer the sale of Stella - its first option to repay the Castle loan - until after December 2007.
He was aware Octaviar had "ongoing dialogue" about finance with bank lenders and believed assurances that it could raise the capital to meet its repayments within a week if pushed.
"They can access the capital markets in that sort of timeframe," he told the court in Brisbane.
"We knew they had done raising on the market earlier in the year so we knew they were capable of doing it."
In December 2007, Fortress decided not to extend the loan again, and sought a $100 million repayment instead.
"$25 million was not a significant enough payment in our minds," he said.
"We had underling facilities ourselves in our business that required repayment."
Mr Kelleher said he wasn't worried about the source of the funds at the time, and later found out they had come from Challenger Financial.
He was also questioned about another loan for Octaviar to acquire a retirement project known as Young Villages Estate.
The $53.5 million transaction was closely followed by the January 2008 capital raising plan by MFS founder Michael King that was poorly received by shareholders.
Shares plunged from above $3 to 99 cents in response.
Mr Kelleher said he did worry about that, but still had no concerns about Octaviar's ability to service its loans.
The inquiry, aimed at finding out exactly when Octaviar became insolvent, is set to continue next year, with Fortress witnesses set to face more questions in February.
AAP
Frankly this beggars belief - a major international financer lends $250mill and was confidant that Octaviar could repay the loan at short notice even after the share price dives to 99 cents! And this is after yesterdays admission that a junior staffer without formal training did the due dilligence on the loan. What a load of cods wallop!! Just a case of tying to frustrate the liquidators attempts to fix an insolvency date that might require Fortress to give back the $250 mill it is holding in escrow.
SMH http://www.smh.com.au/business/gold...-had-faith-in-failed-firm-20101216-18z3f.html
Gold Coast property chief had faith in failed firm
December 16, 2010 - 3:19PM
The head of a major financier of collapsed Gold Coast property group Octaviar trusted the company could repay a major loan within a week, and didn't question the source of a $100 million repayment.
Fortress Credit Corporation chief David Kelleher on Thursday continued his evidence into the company's 2008 failure.
Previously known as MFS, it collapsed owing about $2 billion to creditors, including Fortress.
Advertisement: Story continues below
Lawyer for the liquidators Kylie Downes on Thursday used hearings in the Brisbane Magistrates Court to focus on a Fortress loan to one of the companies in the Octaviar group known as Castle.
It was extended twice before it was repaid in February 2008, from the proceeds of the sale of Octaviar's Stella travel business.
Fortress itself had previously considered buying Stella and analysed its value after debts, but did not proceed.
MFS sold 65 per cent of the business for about $400 million in February 2008 to private equity firm CVC Asia Pacific.
Mr Kelleher said he was not concerned when Octaviar decided to defer the sale of Stella - its first option to repay the Castle loan - until after December 2007.
He was aware Octaviar had "ongoing dialogue" about finance with bank lenders and believed assurances that it could raise the capital to meet its repayments within a week if pushed.
"They can access the capital markets in that sort of timeframe," he told the court in Brisbane.
"We knew they had done raising on the market earlier in the year so we knew they were capable of doing it."
In December 2007, Fortress decided not to extend the loan again, and sought a $100 million repayment instead.
"$25 million was not a significant enough payment in our minds," he said.
"We had underling facilities ourselves in our business that required repayment."
Mr Kelleher said he wasn't worried about the source of the funds at the time, and later found out they had come from Challenger Financial.
He was also questioned about another loan for Octaviar to acquire a retirement project known as Young Villages Estate.
The $53.5 million transaction was closely followed by the January 2008 capital raising plan by MFS founder Michael King that was poorly received by shareholders.
Shares plunged from above $3 to 99 cents in response.
Mr Kelleher said he did worry about that, but still had no concerns about Octaviar's ability to service its loans.
The inquiry, aimed at finding out exactly when Octaviar became insolvent, is set to continue next year, with Fortress witnesses set to face more questions in February.
AAP
Frankly this beggars belief - a major international financer lends $250mill and was confidant that Octaviar could repay the loan at short notice even after the share price dives to 99 cents! And this is after yesterdays admission that a junior staffer without formal training did the due dilligence on the loan. What a load of cods wallop!! Just a case of tying to frustrate the liquidators attempts to fix an insolvency date that might require Fortress to give back the $250 mill it is holding in escrow.
