Macquarie Group takes action against MFS (Octaviar)

Media reports today are pointing to legal action between Macquarie Group and Michael King, the founder and former chief executive of MFS, now more commonly known as Octaviar.

The aim of the action is to reclaim millions lent to a number of private companies created by King, the article said.

The report states Macquarie is seeking the repayment of millions of dollars lent in margin loans to several private companies set up by King and Philip Adams, a co-founder of MFS. According to the article, a number of private companies owned by King and Adams took $200 million or more in margin loans against the 13 per cent stake they held in MFS, which was once worth $250 million.

The article states that in 2007 three companies held by the founders had more than $90 million in loans, mostly in margin facilities. Virtually all assets in these companies are now worthless, as they were held as shares in MFS, the article states.

Macquarie isn’t the only bank with exposure to the companies associated with MFS, the report states, with Adelaide Bank also exposed along with the Public Trustee of Queensland. Others with potential exposures include BT Australia, Lift Capital, St George and National Australia Bank, while Challenger and Wellington Capital are also owed substantial amounts.

After months of trying to fight off winding up orders and demands from creditors, the directors of Octaviar appointed Deloitte as a voluntary administrator in September last year.

The Queensland-based financial services group struggled to stay afloat when faced with demands for $40 million from the National Australia Bank and legal action from Challenger Managed Investments.

The final blow was dealt when a number of former and current shareholders announced they would also seek legal action.

Prior to appointing a voluntary administrator, Octaviar had attempted to reach an accommodation with its large unsecured creditors, but some of the proposals were rejected.