LM wind-up misses investors

Administrators of failed Gold Coast fund manager LM Investment Management are considering handing the company back to its directors, which include flamboyant chief executive Peter Drake.

Giving the company back to its directors under a deed of company arrangement would avoid liquidation and a full investigation of the collapse of LM, which had funds under management of at least $750 million.

Investors in the LM group's funds are not creditors of LM Investment Management, administrators Ginette Muller and John Park, of FTI Consulting, said in a circular posted to the company's website. However, the funds, which have been frozen, are under the effective control of the administrators.

Ms Muller revealed a deed of company arrangement was possible during a phone hook-up with financial advisers and directors of LM Investment Management on Tuesday. She said it was "usual" for directors or another party to put forward a deed of company arrangement at a second meeting of creditors. A first meeting is to be held on April 2 on the Gold Coast, and a second meeting would normally be due within an additional 30 days.

However, Ms Muller said she and Mr Park planned to ask a court to extend the date by which the second meeting must be held by three months.

Asked whether the company could instead be placed in liquidation, Ms Muller said: "We don't see that as an option at this point, because if we did we wouldn't be going to the court to basically say, 'Hey let's get an extension to the convening period so we can look at all the options'.

"But having said that, it's possible, and ... it's up to the creditors to decide the future of the company."

The liquidator of a failed company is required to investigate its collapse and has extensive powers to do so, including the power to summon witnesses to give evidence under oath at an examination.

Ms Muller told the financial advisers they may be creditors of LM Investment Management because they are owed commissions for putting clients into the company's funds.

"We've just made that assessment for the moment," she said. "Investors are not creditors."

She also said administrators plan to ask Deutsche Bank for an additional loan on top of the $40 million it has advanced to the group's LM First Mortgage Fund. However Suncorp, which is owed $22 million by LM's troubled Managed Performance Fund, wants to exit its position and the debt will need to be refinanced, she said.