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Forsyth Barr in regulator sights over sales of Credit Sails

December 14, 2010

Forsyth Barr in regulator’s sights over sales of failed Credit Sails securities

By Paul McBeth

Scoop.co.nz

Dec. 8 (BusinessDesk) – The Commerce Commission has launched a probe into brokerage Forsyth Barr’s role in the sale of a failed NZX-listed security known as Credit Sails.

A spokeswoman for the watchdog said it’s investigating whether “misleading representations” were made about Credit Sails’ characteristics and risk during the 2006 sale and listing, which netted some $91 million from the public. Forsyth Barr was the lead manager and underwriter of the bonds, which were issued by Cayman Islands-registered Credit Sails Ltd. and promoted by Credit Agricole SA subsidiary Calyon Hong Kong Ltd.

“As the investigation is underway the Commission will make no further comment,” the spokeswoman said.

The Credit Sails notes, which Standard & Poor’s had given an investment grade AA credit rating, were pitched to mum and dad investors and charity organisations at an interest rate of 8.5%. The cash raised was used to invest in Momentum Collateralised Debt Obligations, a security backed by a pool of various types of debt.

The securities fell over last year with the Momentum CDOs exposure to Iceland’s failed finance sector and U.S. investment bank Lehman’s Brothers sapping their value, the final blow coming when American directory publisher Idearc Inc. filed for bankruptcy.

By May 2009, investors were told they’d lost more than 99% of their principal, and could look forward to a payment in December 2012 of $11.66 plus interest for every $1,000 they’d put in.

 

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