Re: Octaviar MFS Premium Income Fund PIF
MAJOR UPDATE # 7 (Part 1)
WE ARE NOW 103 INVESTORS IN THE PIF ACTION GROUP
A super thanks to all who have contributed to achieving this critical number - this gives us respectable potential.
Matters of main interest outcomes from my discussions with PIF Managing Director - Jenny Hutson
The $50 million MFS LTD Support Facility (SF)
There has been serious concern expressed that this SF would immediately expire on the PIF being transferred to a new RE, namely Wellington Capital (WC). Jenny has expressed to me that she advised Octaviar that she would not undertake the new RE role, as a condition, unless she could gain access to the SF. She therefore, negotiated a signing of an "amending deed" to the PDS, to extend PIF access to this SF. It should be remembered that the $50 m SF is part of the remaining assets of MFS LTD, it was explained that there are 5 creditors lining up for this MFS LTD money, so investors should not expect 100c (or anywhere near it, perhaps south of $25M). The ranking of all 5 creditors including the PIF is equal.
Living and Leisure Australia (LLA)
LLA owes the PIF approx $63 million and Jenny had begun negotiations with them on behalf of the PIF 02/05/08. She advised me that the NAB ranks first for any money available from its sale or liquidation, the PIF ranks second. When asked what she would expect the PIF to receive, the answer was, as negotiations continue, the % changes every day. I could not press her on the % $ value. The second creditor ranking is a plus for the PIF.
Some in the Action Group are pushing for the PIF to convert this L&L debt to us, into equity or a controlling share in L&L, possibly in a partnership with Packers Arctic. The idea being that it would be a cash producing business with PIF investors waiting longer for cash realization. Jenny advises that WC has explored this option and are looking at it from the view of what will provide maximum % return to the fund - this will be a matter of negotiation as well.
Causeway Boutique Fund $50
This outstanding money owing to the PIF is often not addressed or even known. Advised this facility is not fully drawn and is considered by WC to be run by a good operator (ex Merrill Lynch people). Jenny feels confident that these moneys will be realized, probably 100% - the bad news being, it will take 4.5 years to do so.
Centrelink / ASIC treatment of pensioner investors
Centrelink to continue to count former distributions, now stopped, as if they were still being paid, simply because the PIF is not in receivership and so farcically classed as viable by ASIC. I pointed out to Jenny that ASIC are the decisionmakers on this ruling. I asked if she could liaise with ASIC to get them to re-consider this "classed still viable" ruling. She agreed that this ruling was harsh and would be prepared to discuss this with ASIC, so long as the Action Group would be kind enough to find the appropriate ASIC officer that has the decision making capacity on this ruling on the PIF. I said, I have been given one contact name at ASIC already and would approach that officer shortly and get talks between the two parties.
ASIC involvement in PIFJenny would not be drawn into this and said that as a group we need to get that info from ASIC, but would comment only that. There was another point brought up by an AG member about ASIC, which I presented, but at present I feel it would be best kept to myself.
Distributions
After the contractual, RBOS, debt has been paid, recommencing distributions is Jenny's No.1 priority. It is seen by her as a matter of moral urgency. These distributions will not be done monthly, but quarterly.
The recommencement date of distributions will probably be advised at the forums in July but not before the Royal Bank of Scotland is paid out.
The percentage interest rate of the distributions is hoped to be similar to previous rates received, but the maximum will be the target and would be determined or defined by PWC view of the fund.
Will the distributions of interest lost by investors be backdated? No! Sorry about the bad news here. However, this may be an angle with which we and Jenny could press ASIC / Centrelink to reconsider how pensioners are/were deemed, perhaps, try for a backdated payment from C/L of non received monies that were deemed, but this is just speculation on my part (breaker), see how it pans out.
Will there be sufficient funds available in the PIF to cover distributions?
PWC need to complete there audit to allow a quality answer. It would not be totally paid out of profit or PIF derived income, but that distributions would be derived, part from 1] incoming profit and 2] part from existing capital (net assets). What percentage of each is up to PWC. This of course means that any of our % possible future redemption would be reduced by the proportion of the % coming out of existing capital assets in that distribution payment. In other words if the % was 50/50, and your monthly payment was $500, the amount taken off your investment lump sum would be (reduced) by $250 per mth - (an example only).
Hardship Early Redemptions
I put to Jenny the option of partial minor redemptions, immediate distributions or immediate distributions of investors own personal investment. No! Jenny said, she could not re-work this kind of debt within the broader fund interests. It was also felt that as recommencement of distributions are WC's main priority it was going to be answered that way.
Redemptions
Redemption request are pouring into the fund.
This is a major topic and will be complex.
This will be addressed under another header following.
Proposed WC should buy out some of PIF debt to justify WC management rights.
Felt that WC has already committed to pay OCV / MFS LTD for the management right. I said, should you not have paid any management rights payments to the PIF, the answer being that asset shares had to be bought to acquire the management rights and they are not in the PIF.
Jenny felt that her ability to negotiate the chance to acquire access to the $50 million MFS LTD Support Fund was her contribution to the PIF debt. She felt that the fund would may have gone into liquidation if she did not take quick action. Further, in that action, negotiating for the "deed amendment" in the PDS, for access to the SF, she felt confident, would not have happened otherwise.
Fee structure to be discussed under another header.
Wellington Capital will give formal proposals and the difficult issues to tackle, to investors at the forums in July.
She is aware of AG efforts to line up another RE
Can creditors of OCV / MFS LTD now gain access to PIF funds (QPT, NAB, Challenger, etc)?
No! The PIF is now a separate fund and isolated. Jenny felt that if it stayed there, there was the possibility of creditors accessing certain PIF monies if it went into receivership via receivers judgments on the matter.
WC Board membership by Action Group members
WC has several funds that are managed and it was considered unworkable for an AG member or two, to be on a board that represented more than one fund.
In the negotiation process, Jenny accepted the accommodation of a committee made up from the AG that could set up a formal structure of communication with Jenny and / or the WC Board for proposals for consideration. I pointed out our main goal was the maximisation of % return for investors. In that she said, we were in agreement. She offered that she did not have a monopoly of wisdom and agreed that we would not always agree.
Refinancing creditor for remaining RBOS debt
Confidential at present.
Where did RBOS debt payments come from
Selling assets - incoming payments from developers (customers) and selling actual physical assets (e.g., GEO $10.2 mill). Further debtors (customers) have that could have defaulted, have been encouraged to refinance (otherwise deficiencies in PIF would be higher.
Is the PIF still loaning money
No! The RBOS has first access to monies and incoming monies can't be recycled until RBOS paid off.
Will PIF loan monies again? All going well, it is hoped a good way down the track.
PART 2 to be posted shortly (NSX listing + other matters)
part two is the more complex and the more important