OPI facing Securities Commission inquiry

Failed finance company OPI Pacific Finance is being investigated by the Securities Commission after leaving more than 10,000 investors $255 million out of pocket.

OPI, which was widely sold through the collapsed Vestar financial advice group, froze repayments to its investors in January 2008 and then reached a moratorium agreement with them in May 2008.

PricewaterhouseCoopers receivers Colin McCloy and Maurice Noone were called in last month after OPI's parent company Australian-based Octaviar was placed into liquidation by the Queensland Supreme Court.

Yesterday McCloy released his first report on the state of the company, warning debenture investors to expect a "significant shortfall" in the amount of money owed to them.

Around 1000 unsecured noteholders who are owed $57.5 million were told to expect nothing back.

"To be honest, it doesn't look good," he said.

The majority of the company's loans are second-ranking mortgages on property developments which are in various stages of completion or for property sold prior to the receivership.

McCloy said of the secured loans 19 of the 35 borrowers were in some form of insolvency or had been struck off.

"Given the insolvency position of many of the borrowers and the anticipated shortfall to the first registered mortgagees, it is likely there will be a significant shortfall from recovery from the loan book."

Much of the moratorium repayment had relied on Octaviar paying up on a "put option" arrangement which would have seen the Australian company pay out on failed loans.

McCloy said it had lodged a claim in the liquidation of Octaviar for A$418 million ($533 million) to claw the money back but had yet to hear back from the liquidators. It was also trying to recover A$184.4 million from an associated company called OPI Pacific Investment Pty which OPI assigned loans to in December 2006.

However 18 borrowers out of the 20 loans were also in some form of insolvency.

McCloy said he understood that "various government authorities" were investigating the affairs of the company.

A spokesman for the Securities Commission confirmed OPI was one of a number of finance companies it was investigating but would not discuss details of the case.