This article is from the Australian Property Journal archive
OCTAVIAR Limited, formerly MFS Limited, yesterday unveiled the true state of its financial position – booking a $221.26 million loss for the half year ended December 31.
The diversified financial services and property company booked the horrific result despite just under $1 billion worth of assets including 65% stake in its hospitality group Stella, which was sold at a $590 million loss for $406 million, and a $52 million loss to its listed securities.
And the sale of its 100% stake in Gersh property and advisory group to companies controlled by or associated with its principal and founder Joseph Gersh, incurred a loss of approximately $118 million.
Octaviar yesterday blamed “the rapid and unanticipated tightening in credit markets and upheaval in equity markets in recent months” for its dismal financial position.
In the directors report, Octaviar said the market reaction to the proposal was particularly unfavourable and the share price decreased significantly.
“The then CEO resigned shortly thereafter. Parties with whom we were negotiating transactions paused to assess the impact of events, financing facilities and deliberations came under scrutiny as a result,”
But the group’s auditors KPMG said the “quantum of this impairment cannot be presently determined,”
Octaviar also said intense negative press attention, eroded goodwill toward the group.
Meanwhile, despite the group reducing its debt by $1.125 billion since December 31, Octaviar has listed a further $1.39 billion worth of liabilities “as held for sale”.
Octaviar said the group will need to reach accommodation with its large unsecured creditors to continue as a going concern.
The large unsecured creditors are: the trustee for the holders of the listed notes which have a face value of approximately $349 million; Challenger Managed Investments Limited who hold unlisted bonds with a face value of $100 million; OPI Pacific Finance Limited for a $246 million provision made in relation to the put option obligations; the Responsible Entity of the Octaviar Premium Income Fund where a $50 million obligation exists in relation to a Financial Support Mechanism agreement; the Australian Taxation Office in relation to income tax of the year ended 30 June 2007. No assessment has been issued however a provision of approximately $53 million has been made in this financial report; and various parties who hold guarantees including the National Australia Bank to a guarantee for $40 million.
Adding to the group’s woes, Challenger Managed Investments has commenced proceedings alleging a number of breaches of the contractual terms.
Octaviar said it denies there has been any breach and is defending the claim. But if Challenger succeeds, the $100 million bonds may become due and payable immediately – not in November 2011.
Auditors KPMG yesterday said it was unable to form a conclusion.
“Specifically, the company will need to reach an accommodation with its large unsecured creditors to remain a going concern,” KPMG concluded.
Australian Property Journal
