Three more years: OPI investors wait and hope

The fate of over $300 million invested in MFS Pacific Finance debentures and notes now hinges on the company's Australian parent successfully selling down its assets over the next three years.

Tuesday, May 20th 2008, 5:15AM
In approving the moratorium on repayments yesterday, debenture and note-holders in the renamed OPI Pacific Finance have joined the queue of unsecured creditors to the ASX-listed Octavier (previously MFS).

As part of the moratorium agreement, which was approved by close to 99% of debenture and noteholders, Octavier agreed to share with those investors proceeds of asset sales, including its remaining 35% stake in the Stella travel group.

Octavier said it would distribute the proceeds of any asset sales to creditors based on their proportion of the group's overall debt, which totaled almost $930 million.

The New Zealand firm owes $256.7 million to secured debenture holders and a further $56.7 million to unsecured noteholders.

Under a put option, Octavier was bound to cover losses relating to OPI Pacific loans, which the group said, if exercised now would currently amount to only $43.4 million.

In December last year MFS, which owns 38.5% of OPI Pacific, also told the ASX it would continue to "provide financial support" to Pacific Finance.

However, the moratorium agreement states the announcement did not "amount to a guarantee of the payment of any amounts by MFS or the continued provision of such financial support".

OPI Pacific debenture holders will receive some immediate relief with the release of $23.1 million (or about 9% of debenture capital value) held in trust by Octavier pending approval of the moratorium.

Yesterday's moratorium document also laid bare the parlous state of OPI Pacific's loan book with only $122 million of $476 million lent expected to be recoverable.

Over half of the loans were to MFS-related parties, including $168 million lent to a subsidiary, which in turn owes $38.7 million to US distressed lender Fortress.

Despite the dire situation OPI Pacific said in the moratorium agreement that most investors should recover their capital under its three-year plan.

"Should MFS's proposed restructuring and asset realisation program be achieved at the amounts that MFS expects to receive (although of course no guarantees can be given), Pacific Finance's Stockholders (including the unsecured noteholders) should be repaid their principal over the three year term of the Moratorium.

"However, it is likely that, even in this scenario, there would be a shortfall in payments of interest, particularly to Unsecured Noteholders."

Under the terms of the moratorium the company has until August 29 to finalise a standstill agreement with Octavier that would see the put option frozen.

A spokesperson for OPI Pacific said the company would also be closely monitored by the trustee, Australian adviser Korda Mentha and accountancy firm PriceWaterhouseCoopers, for the duration of the moratorium.

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