Merrill Turns In Surplus To Administrators

Sydney Morning Herald

Saturday April 5, 2008

Colin Kruger and Danny John

THE FIRST positive signs are emerging for Opes Prime's unsecured creditors, with Merrill Lynch returning surplus funds to the failed broker's administrators after successfully selling off its $500 million share portfolio to cover a similar amount of loans with Opes clients.

The administrator John Lindholm, of Ferrier Hodgson, would not comment on the size of the surplus before a creditors' meeting on Tuesday due to market sensitivity concerns.

"We don't want to jeopardise the money available for creditors," Mr Lindholm said.

The quick sale, and lack of controversy over Merrill's stake, is in stark contrast to the legal and regulatory quagmire surrounding ANZ Bank.

The bank has refused to comment on how the sale of its $700 million share portfolio, against loans totalling $650 million, is faring. The share sale is not expected to be complete any time soon, even if legal action by Opes clients trying to recover their shares is resolved quickly. Either way, unsecured creditors, mostly Opes clients who used shares as security against loans with the firm, are expected to be the losers.

"It's going to be a very messy, prolonged and expensive legal battle," said Ian Ramsey, director of Melbourne University's Centre for Corporate Law. "They will be taking losses - it's only a matter of how big a loss".

Controversy is also growing over the bank's failure to disclose its substantial shareholdings in companies as a result of its ownership of the Opes share portfolio.

Under corporations law, companies are required to give notice of such shareholdings within two business days. Breaches of the law carry a potential penalty of up to six months in prison.

But it is believed that talks between ANZ and the corporate regulator, the Australian Securities and Investments Commission, are likely to result in the bank being granted a waiver over its requirements to disclose the size of its stakes in dozens of listed companies.

Neither ANZ nor ASIC would disclose the result of their talks, but it is believed the regulator is sympathetic to the deluge of work the Opes Prime crisis has caused the bank.

A bank spokeswoman would only say last night: "The substantial shareholder notices and our disclosure obligations are currently the subject of legal review by ANZ".

The developments came as pressure on ANZ to clarify the legal position on its ownership of the stock seized from Opes and its Corporation Act disclosure requirements increased yesterday after further statements by small ASX-listed companies caught up in the furore.

At least four of the firms involved - all resource companies - said the shareholdings now under the control of the bank were above the discloseable limit of 5 per cent that required ANZ to issue substantial shareholder notices to the Australian Securities Exchange.

In each of the cases, the companies told the exchange that at no stage had they been served with notification that such a large parcel of shares had changed hands and were now owned by the bank.

The Opes Prime saga also appears to have delivered a knockout blow in the case of at least one takeover bid.

The iron ore miner Portman acquired a 10 per cent stake in Golden West Resources, throwing a spanner in Fairstar Resources' planned takeover of the company. Portman revealed yesterday it had secured 11 million shares, or a 10 per cent stake in Golden West.

The stake in effect blocks a compulsory takeover of the company.

"Portman's purchase basically kills the Fairstar bid," the DJ Carmichael analyst James Wilson told AAP.

ANZ Bank has also had to give ground and offer undertakings to the Takeovers Panel not to sell its stake in the biotech group BioProspect until it can disclose its relevant interest in the stock.

BioProspect sought interim orders on Thursday to prevent ANZ selling its stake in the company, believed to be up to 26 per cent of its listed shares.

"On the basis of the undertakings, the panel considered it did not need to make the interim orders sought," it said in a statement yesterday.

The panel is expected to meet soon and make a decision on the application.

© 2008 Sydney Morning Herald

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