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Some Credit Sails clients given access to buyback

July 22, 2010

Some Credit Sails clients given access to buyback

By TIM HUNTER – BusinessDay.co.nz

Last updated 05:00 15/07/2010

Some clients of sharebroker Forsyth Barr may have been offered the chance to exit their investment in a complex debt security with minimal losses, well before a series of defaults eroded its value.

The product, Credit Sails, raised $91.5 million from investors in May 2006 but suffered a huge decline in the financial crisis and is now virtually worthless.

Investors now facing losses of close to 100 per cent were told Credit Sails notes were capital-protected and carried a AA rating from Standard & Poor’s.

It seems some, however, were more fortunate.

In an an email dated July 11, 2007, a Forsyth Barr adviser told her client:

“We are concerned about Credit Sails and the quality of the capital guarantee via the CDO and have arranged for weekly buyback from the French investment bank who arranged this investment.”

Click here to read the complete version of Some Credit Sails clients given access to buyback, by Tim Hunter, 15 July, 2010.

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6 Comments leave one →
  1. Paul Herbert permalink
    July 26, 2010 12:06 AM

    I was given no opportunity by Forsyth Barr to get out. I met before the Credit Sails issue with a Forsyth Barr Hamilton broker. Being” able to sleep at night “was a phrase she repeatedly used. I told her I was interested in accumulating some corporate bonds. She mailed me the Credit Sails application later. I believed I was purchasing a portfolio of investment grade corporate bonds.

  2. Chris Lee Client permalink
    August 17, 2010 11:58 PM

    I have been in touch with Chris Lee of Project Resources Ltd. through whom I purchased Credit Sails.

    He advises :

    1) He never heard about Calyon buyback.
    2) He was not advised of changes in the portfolio of Calyon until too late to do anything.

  3. Anonymous permalink
    August 18, 2010 12:02 AM

    Response from Christchurch Forsyth Barr Advisor when the questions were posed by a client:

    Thank you for your email. In response to the article you refer to our Managing Director, Neil Paviour-Smith was interviewed by Business Day, a copy of which we have attached for your reference. We are endeavouring to ensure there is a balanced perspective on this issue but it is frustrating when journalists take a pre-determined angle.

    It is correct that some investors chose to sell in the listed market during 2007 and at times Calyon was on the buy side when they believed the discount was overdone. The insinuation that there was a preferential buyback is unfounded and factually incorrect. Depending on individual circumstances some clients chose to sell the security when news of a credit downgrade occurred, however bear in mind that the security still had an S&P rating of A- on the principal at the end of 2007. What transpired during 2008 could not have credibly been forseen by anyone.

    We are obviously dissappointed for all our clients effected by this investment, however in our opinion the Public Trust is best placed to get answers to questions. We assume you have received the attached letter sent last week to registered holders of the notes and we look forward to the outcome of their investigation.

    I hope this provides some clarity for you. If you have any questions, please do not hesitate to contact me.

    Kind Regards

    Forsyth Barr Advisor

  4. Anonymous Forsyth Barr Advisor permalink
    August 19, 2010 3:54 AM

    A key response from a Forsyth Barr advisor when asked about the buyback

    29 July, 2010

    Good morning,

    Yes, we are aware of Logic and we are in the process of writing a letter to all our clients in response to their comments and claims.

    In short, yes there were two buy backs by Calyon, but Credit Sails was a listed investment and therefore able to be traded by investors on the secondary market throughout most of it’s life. As with any listed security, it was always a question of whether there was a reason to sell and was the price fair.

    I note that when the two buy-backs occurred (in June & Oct 2007) Credit Sails had suffered no defaults and still had an A rating.

    Please don’t hesitate to call or email if you’d like to discuss in further depth.

    Kind regards

    Forsyth Barr
    Investment Advisor

  5. Another Anonymous Forsyth Barr Advisor permalink
    August 19, 2010 3:55 AM

    Hi

    Credit Sails was always sellable onm the market. The view was that it was a sound investment and at the time that Calyon started buying back they were doing so because they thought it was cheap. It is hard to see why else it they would have bought it back. Given that the issuer was happy to buy it gave confidence that there was no problem. Once there were issues re the credit crunch it was too late unfortunately.

    I hope that answers the question?

    Regards

    • November 16, 2010 10:42 AM

      Thanks Andy. Mr. Lee offers a very clear and independent view. Have you seen his latest Taking Stock from November 11, 2010?

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