lift capital collapses

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    Lift Capital collapses
    11/04/2008 5:40pm Email to a friend Print article

    The bear market has claimed another margin lending company with unlisted stockbroker Lift Capital Partners Pty Ltd slipping into voluntary administration.

    Lift's failure follows the troubles of broker Tricom, and then two weeks ago, the collapse of security lending specialist, Opes Prime.

    However, Lift investors may have more reason for optimism with early indications from its administrator, McGrathNicol, they may get a "reasonable" return after Lift's own lender Merrill Lynch is paid out.

    It is believed the investment bank is owed close to $600 million, secured against stock worth between $700 to $800 million.

    That portfolio of stock is now being quickly sold off.

    The latest casualty of the turning market has prompted concerns other financial firms using a similar stock-lending model may also be vulnerable.

    The Australian Securities and Investments Commission (ASIC) began looking over Lift after Opes collapsed.

    But the corporate watchdog refused to confirm how many other stockbrokers it is now looking at following the Opes collapse.

    There is no indication Lift received a margin call from Merrill Lynch as the value of its portfolio declined in the falling market.

    Instead, it appears its management was forced to call in administrators after a number of media reports questioning its viability triggered a run of investors wanting to liquidate their assets.

    Confirming ASIC's investigation, Superannuation and Corporate Law Minister Nick Sherry said the federal government was changing the Corporations Act to deal with what was known as "covered short-selling".

    "We've already commenced the significant task of re-writing, simplifying the very complex disclosure documentation in financial services," Senator Sherry told reporters in Melbourne.

    "This includes margin lending. It may as well be written in Latin for all that Australian investors can understand at the moment."

    A key issue to emerge in the Opes Prime collapse is the legal status of the shares that were used as security against margin loans.

    A Federal Court hearing on the Opes case later this month is expected to determine the question.

    Meanwhile, Lift clients are being given some cheer from administrator McGrathNicol.

    "It expected a significant surplus of funds will be available to Lift Capital once the secured creditor has been repaid," a statement from the corporate recovery firm said.

    In the same statement one of the administrators Tony McGrath added: "It is too early to speculate on the ultimate return to creditors and investors.

    "However, it appears that the underlying value in the shares is good and it is expected that a reasonable return will be achieved."

    A meeting of Lift creditors will be held on April 22, and creditors will be sent information about it in the coming days, the administrator said.
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