LM wind-up misses investors
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.
Frequently Asked Questions about this Article…
LM Investment Management went into administration, and the administrators say the LM group had at least about $750 million in funds under management. The administrators now control the frozen funds while they consider next steps.
The administrators are Ginette Muller and John Park of FTI Consulting. They have taken control of the company and the frozen funds and are running creditor processes and options for the business.
According to the administrators, investors in the LM group's funds are not creditors of LM Investment Management. However, the funds themselves are currently frozen and under the effective control of the administrators.
Yes. The administrators have indicated they are considering a deed of company arrangement (DOCA) that could hand the company back to its directors. A DOCA would avoid liquidation and the full-scale investigation a liquidator would normally carry out.
A first meeting of creditors was scheduled for April 2 on the Gold Coast. Normally a second meeting would follow within about 30 days, but the administrators plan to ask the court to extend that convening period by three months to give more time to examine options.
A liquidator is required to investigate a company's collapse and has wide powers, including summoning witnesses to give evidence under oath at examinations. That is one reason a DOCA can be seen as a way to avoid a full liquidation inquiry.
Administrators have said financial advisers might be creditors of LM Investment Management if they are owed commissions for placing clients into LM's funds. They have made that assessment for the moment, while stating investors themselves are not creditors.
Administrators plan to ask Deutsche Bank for an additional loan on top of the $40 million already advanced to the LM First Mortgage Fund. Separately, Suncorp is owed about $22 million by LM’s Managed Performance Fund and wants to exit its position, meaning that debt will need to be refinanced if a buyer or new funding is not found.
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