Opes money trail warms up

The piquant aroma of cosy deals hangs high above the freshly-shot Opes Prime carcass.

As $1 billion worth of Opes stock was frozen by its bankers last Friday, a series of large lines of stock were "crossed'' through the market at large discounts and are believed to have gone to Tricom.
 
ANZ is the major lender to both Opes and Tricom. When Tricom got into trouble earlier this year and was forced to lay off its loan book, Opes took part of it .

And when Opes got into trouble last week, Tricom looked to salvage what it could from the mess. Had it not got its stock back it would have been frozen along with the other Opes clients. In fact some Opes clients believe it should have been frozen and are asking 'why the blazes wasn't it'?
 
Such would have been a hairy predicament for ANZ which faced losing not one but two of its major clients. Tricom yet hangs by a thread.
 
The crossings were of note. They included 20 million Babcock & Brown Wind, 10 million Everest Babcock, that much talked-about line of 10 million Hedley Leisure and Gaming units, 7 million Arrow Energy, 9 million Babcock Capital shares, 10 million Western Areas and a handful of smaller parcels of other company shares.
 
Babcock & Brown was Tricom's number one client and recently injected $30 million into the foundering broker to keep it alive.
 
The question is, had ANZ whispered to Tricom to get its stock back out of Opes before it went belly up?

No such thing, says ANZ, whose ANZ Nominees is believed to have settled the trades.

Opes clients who had their assets frozen - or make that ANZ and Merrill Lynch's assets, for they had been signed over to the banks - would not like to hear that their pool of assets now being sold by the bank could have been enlarged, had it not been for Tricom's 11th-hour rescue.

Tricom's broking division is believed to have executed the trades.  The Tricom  response was: "Where clients were refinanced by Opes Prime, Tricom settled (i.e. transferred client stock) all transactions up to $66m''. Tricom did not get around to answering the main question about taking its loan exposure back while all Opes other assets were frozen by the banks.
 
Much of the media interest in the story is focused on leading Sydney defence lawyer Chris Murphy who was one of Opes' biggest clients and had large holdings in Challenger and API.

A large line of API, believed to by Murphy's went through the market today. Murphy told BusinessDay he had little idea what was going on, "apart from the fact that I'm losing money''.
 
"I still haven't had a margin call,'' said Murphy. "I'm just a customer of Opes and I don't know what they've done with my portfolio''.

While co-lender to Opes, Merrill Lynch is the culprit behind the stock dumping last Friday, things could turn tricky for ANZ.

The bank's exposure to the Opes loan book had been unsecured and it took a charge over the assets only a week before appointing its receivers from Deloittes last Thursday night.
 
Despite the last-minute charge, the bank then began selling Opes' stock on the market on Friday morning.

ANZ, however, sold 12% of its holdings at a discount of just 1.5% to Thursday night's close while Merrills sold about 60% of its $400 million in holdings, crunching assorted share prices along the way and sending Opes clients into despair.

Merrills has been under pressure from its exposure to the sub-prime blow-up in the US and no doubt wanted to minimise its exposure to another fall in the markets.

As Opes clients had pledged their assets under the Opes' securities lending arrangements to the two bankers, many believe they will not see much in return from Opes even if their loans were a small portion of their collateral.
 
While corporate regulator ASIC has preferred to focus on the whereabouts of Opes executive Laurie Emini - and is believed to be investigating the events of last Friday - ANZ's position as secured creditor may be compromised.

Under ''preferential payments'' laws a charge can be rendered void if it has been made within six months of receivers being appointed. ANZ took its charge just one week before appointing receivers.

In ANZ's defence, it actually had title over the stock and therefore the right to sell it. However, any payment from Opes to ANZ over the past few weeks may be rendered void under the preferential payments legislation and this is something the administrator may pursue should it become a liquidation .

"ANZ has owned the shares which secured Opes Primes debt at all relevant times,'' said a spokesman for the bank.  "ANZ has been selling the security portfolio as its owner, not pursuant to the charge.

In practice, the charge covers all residual assets of Opes Prime and forms security for an additional facility advanced recently to Opes Prime,'' the bank said.

It is quite incredible that ANZ had an exposure of $650 million or more to the high-risk prime broker before it took its charge last Thursday.

Opes did have a close relationship with the ANZ, though, and is believed to have had regular meetings with Opes executives and would have been keenly aware of the prime broker's specific exposures.
 
It is understood that Opes lenders may have taken charge, or even sold stock, belonging to Opes client super funds. As super fund assets cannot be transferred to a third party, the banks are also vulnerable to legal challenge on this front. This point, though, could not as yet be confirmed by the banks.
 
One Opes client told BusinessDay that he had more than $1 million cash with Opes but had not been able to find out from  the receivers whether that cash had been transferred to ANZ or Merrills. Under prime brokers' contracts all assets of the client are taken as security and pledged either to the broker or its lenders.
 
mwest@fairfax.com.au