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Credit Sails trustee probes potential breaches

August 9, 2010

By TIM HUNTER – BusinessDay.co.nz

Last updated 05:00 02/08/2010

The trustee for failed security Credit Sails, a now-worthless product sold to investors for $91.5 million, is investigating potential breaches of the trust deed and offer document rules by the issuer, a special purpose vehicle registered in the Cayman Islands.

When Credit Sails were offered in 2006 they were touted as capital-protected, high-yielding notes – features attractive to risk-averse investors seeking income.

As it turned out, the capital protection had fatal flaws that were exposed in the financial crisis and instead of escaping with their capital, investors found their money gone.

On July 22 NZ Permanent Trustees wrote to investors saying it was continuing its inquiries in relation to the offer documents “due to the materiality of losses suffered.”

The issues were complex, it said, “and it has taken more time than originally thought for the trustee to obtain all of the information it requires to make its assessment”.

It is the first time the trustee has written to investors for more than a year and it is unclear what questions the trustee was asking the issuer.

A spokesman for NZ Permanent declined to answer questions from BusinessDay but provided a statement saying it was “required by the Securities Regulations 2009 to take all reasonable steps to ascertain whether there has been any breach of the terms of the trust deed or of the terms of the offer of the notes”.

“NZPT is investigating whether there has been any breach of the trust deed or offer documents by the issuer of the notes.”

Cayman Islands-registered Credit Sail Ltd, the issuer, has only two directors, neither based in the Caymans. Both are accountants with a firm in the island of Jersey, a tax haven off the French coast.

The promoter and creator of the notes, a subsidiary of giant French bank Credit Agricole called Credit Agricole Corporate & Investment Bank, formerly known as Calyon, has no New Zealand presence.

Its Australian branch referred questions from BusinessDay to the group’s press office in Paris.

Questions emailed to the press office received no response.

Click here to read the article by Tim Hunter on BusinessDay.

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