THE sharemarket turmoil has claimed another margin-loan specialist the privately owned Lift Capital going into voluntary administration late on Thursday with debts of $650 million.
But the fallout is not expected to match the disaster triggered by the collapse of the Melbourne broker Opes Prime.
Tony McGrath and Joseph Hayes of McGrathNicol were appointed voluntary administrators to Lift Capital Partners Pty Ltd and Lift Capital Nominees No. 1 Pty Ltd. The latter acted as the holding vehicle for the shares pledged against client loans.
Merrill Lynch, which was exposed to the Opes collapse, is in the frame again, as Lift's financier, with exposure estimated at about $650 million. The investment bank has taken possession of a client share portfolio estimated to be worth about $800 million to pay down Lift's debts to the bank.
The Lift administration was not triggered by a margin call from Merrills or default on Lift's debt, but it is understood administrators were called in after Merrill's refused further funding. The Australian Securities and Investments Commission is working with the administrators to check for any potential breaches of the Corporations Act.
As at Opes, Lift's margin loan business model proved too fragile in a falling sharemarket, but that is where similarities with Opes end, say people involved. The 1600 Lift clients exposed to the collapse are expected to face modest losses, and no one is alluding to links to the Melbourne underworld, or "irregular transactions" with clients.
Administrators said they expected "a significant surplus of funds will be available to Lift Capital once the secured creditor has been repaid". Mr McGrath said underlying value in the shares appeared good, and "it is expected that a reasonable return will be achieved".
It is understood most of the share portfolio consists of ASX200 listed stocks and few of the loans relate to directors shareholdings.
According to recent reports, Lift was exposed to some of the corporate collapses in the credit crunch. This included a $25 million exposure to the financially crippled investment firm MFS, via the founder Michael King, and the senior executive Phil Adams, who took out margin loans on their MFS stock with Lift.
Allco Finance executives were also reported to have tapped Lift for $50 million worth of financing for their investment vehicle Allco Principals Investments, which is now in receivership.
The unlisted company was pushed into administration last month when National Australia Bank and the Bank of Scotland seized API's main asset, 52 million shares in the listed Allco Finance Group, after margin calls on loans totalling $150 million. Lift clients were also exposed to the collapse of two Absolute Capital hedge funds last year. Lift offered margins loans on the funds to its clients.
Mr McGrath and Mr Hayes are also the administrators for Absolute Capital last November.
The Lift Capital debacle is unlike that of Opes, in that clients did not automatically hand title over their shares to Lift and Merrills when they signed over for their loans, but the difference is academic now, as the appointment of administrators triggered a charge by the bank that gives it ownership of Lift's entire client share portfolio.
A creditors' meeting is expected on April 22, when administrators are expected to give an update on the company's position.
