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OPI sues Octaviar for $270m

David Chaplin

Tuesday 24th June 2008

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David Chaplin
OPI Pacific has issued a A$270 million legal claim against its major shareholder, the ASX-listed Octaviar, citing problems with the Australian group's lending activities.

A spokesperson for OPI said the claim alleged that Octaviar (previously known as MFS) breached the loan management agreement it had with the NZ firm.

"Pacific Finance has already made it clear it was disappointed in the loan book position," the spokesperson said.

He said it appeared the Australian firm did not fully disclose all the information to OPI about the status of the loans it was managing on behalf of New Zealand investors.

Octaviar and associated entities were chiefly responsible for investing the almost $500 million raised by OPI Pacific in NZ - most of which was invested in the Australian property market. Earlier this year it was revealed that only $122 million of OPI loans were likely to be recovered.

David Anderson, Octaviar company secretary, confirmed the Australian firm (formerly known as MFS) had received notice of the legal action from OPI Pacific but declined to discuss any further details.

"On 19 June 2008 OPI Pacific Finance Limited advised of a damages claim for approximately $270 million against both Octaviar Limited and an Octaviar subsidiary which provides management and other services," Anderson said in a release to the ASX yesterday.

In the ASX statement Octaviar also revealed its discussions with most creditors had deteriorated since June 5. As well as the OPI legal move, Octaviar has also been stung by a further A$147.5 million damages claim from an associated investment vehicle, the Premium Income Fund, which was already seeking A$50 million from the group.

At least two other court actions were looming for Octaviar: a winding up order from the Public Trustee of Queensland in regards to A$351 million of Octaviar unsecured notes is due to be heard over September 9-10, and; an action by Challenger Managed Investments concerning $100 million of unlisted bonds has been set down for July 21.

The Challenger action is proceeding despite Octaviar agreeing to pay the bonds.

"The litigation regarding additional guarantees that the bondholders assert they are entitled to receive continues," Octaviar stated to the ASX.

The Australian Tax Office has also demanded A$56 million from Octaviar in unpaid income tax. Furthermore, the group has still failed to negotiate an agreement with the National Australia Bank concerning a A$40 million loan to former MFS subsidiary Living and Leisure Australia.

According to the OPI spokesperson, the latest legal claim would not affect the moratorium brokered with NZ debenture holders last month.

However, the moratorium would only prove effective if Octaviar successfully negotiates 'standstill' agreements with its other creditors - an outcome which looks increasingly unlikely.

"There is an element of protecting the position of [NZ] investors [with the damages claim] in light of the other actions against Octaviar," the OPI spokesperson said.

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