Opes settlement a long way off: Kohler

Amazingly, both The Australian Financial Review and the Fairfax broadsheets have gone strongly on stories about ANZ and Opes Prime this morning that appear to be completely wrong.

It is suggested that ANZ has made an offer of $350 million, or 62c in the dollar, to unsecured creditors of Opes Prime via administrator John Lindholm, to settle legal claims. Lindholm denied this in a clear statement yesterday but, apparently, was not believed.

He repeated the denial, through a spokesman, to us again this morning. There are very preliminary discussions taking place between him and ANZ, but no offer. He is unlikely to be lying, so the story is either not true or ANZ has made a settlement offer to someone else.

Or perhaps ANZ is planning to make an offer – they just decided to tell a few journalists before John Lindholm.

It’s possible that settlement discussions are going on with other parties, but with three individual claims and two class actions underway, it would be like negotiating with bees. All serious settlement discussions must start with John Lindholm, on behalf of creditors, and he’s not having any (yet).

The negotiations might not end up with him, depending whether Lindholm feels confident enough to negotiate a deed of company arrangement that would bind all creditors following a majority vote, or whether he confines himself to a settlement of his own actions against ANZ.

But it seems we are a long way from any clarity on these questions, and John Lindholm is likely to confirm that position to the unsecured creditors today when he provides an update.

It is true that ANZ must eventually try to get a settlement over Opes Prime even though it could prove very difficult and, ultimately, very expensive. It would be less difficult and less expensive than litigation.

Having moved quickly to sell security and protect its position when Opes first went into administration, ANZ is now surrounded by cawing lawyers and litigation funders who will not easily be shooed away.

And its legal position looks shakey on a number of grounds, and in any case getting creditors to agree, even by a simple majority of 50%, not to take further claims will be difficult. All 1200 creditors would probably want clear advice on their legal position before negotiating it away.

In effect, any negotiations between Lindholm and ANZ would be an attempt to cut out the lawyers and litigation funders who are promoting those actions. Given the fee feast in prospect, they are likely to fight furiously against a settlement to which they are not parties.

In my view, if ANZ gets out of this for less than 100c in the dollar minus potential legal costs and minus the time value of money (the cases are likely to take a long time, so for the plaintiffs getting the cash now is worth a lot) it will be doing well. It’s unlikely that 62c will do it.

It is a melancholy prospect for new ANZ managing director Mike Smith, especially since the bank has just about finished recovering the debt of $741 million that it ended up with when Opes Prime went broke, by selling the shares that were pledged by Opes under a securities lending agreement.

The problem is that there is a nightmare of inter-connected problems for ANZ; the administrator is claiming that the bank got preferential security and it seems there were multiple failures to lodge substantial shareholding notices.

And the people whose shares ANZ has been selling to recover its debt, and who never knew they would be unsecured creditors in the event of Prime’s collapse, have now been told they will get nothing because of the shrinkage in value of the assets.

So not only are they angry, they now have nothing to lose.

This story first appeared in Business Spectator