Council may sue on investment losses
Gosford Council will await the advice of legal advisors before making a decision on whether it will seek damages for the loss of around $2.5 million in its failed Lehman Brothers investment.
Council's current position comes after the High Court's decision to dismiss two appeals against the Federal Court judgement which found that a deed of company arrangement approved by Lehman Brothers Australia's creditors in June last year was void and of no effect.
Under the High Court decision against Lehman Brothers Australia, local councils, charities and other investors who suffered a loss after the biggest US bankruptcy in history can sue to recover losses.
"At this point, council's advisors will be examining the findings of the High Court decision once a written judgement is handed down, along with any offer that PPB, the liquidators of Lehman Brothers Australia, may put forward and will provide advice to council on the best course of action when all of the information becomes available for consideration," council's director of corporate services Mr Nic Pasternatsky said.
Meanwhile, listed litigation funder IMF told Australian Associated Press that its 70 clients, including local councils, were likely to get back more money than they were entitled to under the proposed deed and deliver a better outcome to councils and other investors in collateralised debt obligations sold by Lehman Australia.
Lehman's liquidators PPB will now work out how much is available to creditors and said the court's decision meant contingent creditors were barred from accessing a $43.2 million compensation fund which would now form part of the assets available to all creditors.
PPB's negotiations with New York-based Lehman Brothers' entities over the unwinding of Lehman-originated CDOs and distribution of the underlying collateral are continuing.
If the negotiations are successful, contingent creditors should receive a significant proportion of their initial investment in the CDOs in their capacity as note holders, PPB said.
Media statement, 8 Apr 2010
Nic Pasternatsky, Gosford Council
Website, 30 Mar 2010
Alison Bell, Daily Telegraph