Relief as $60m recouped

TIM HUNTER
Last updated 07:33 19/12/2012

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A $60 million settlement obtained for Credit Sails investors is the biggest cash payout achieved by the Commerce Commission.

The regulator's general counsel, Mary-Anne Borrowdale, said reaching the landmark deal was hugely satisfying after more than a year of tough negotiation.

Credit Sails raised $91.5m from about 3000 small investors and charitable trusts in 2006 and was marketed as a safe, high-yielding stock with AA-rated capital protection. But by 2008 it was virtually worthless after its structure was ruined by the financial crisis.

Under the deal announced yesterday, companies involved in marketing Credit Sails - broker Forsyth Barr and French merchant bank Credit Agricole Corporate & Investment Bank - will pay $60m into a fund to compensate investors for losses estimated at $70m.

Neither company admitted liability.

Borrowdale said the commission's investigation focused on how Credit Sails, a complex product involving credit default swaps, was sold to investors. The commission forced Forsyth Barr and others to reveal internal marketing documents.

"There were decisions taken about the prominence of messages [to investors] about risks," said Borrowdale. "We found some of those messages and communications very troubling."

Settlement payouts are ex- pected to begin in March. Fairfax NZ

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