Financial planners whose clients have had their assets seized due to the collapse of Lift Capital were given two options to recover their money by the firm’s voluntary administrators yesterday.
They could vote for the broker’s voluntary administrator, McGrathNicol, to liquidate Lift, which would return about 62 cents in the dollar to creditors, McGrathNicol partner Tony McGrath said.
Choosing liquidation would leave McGrathNicol with enough money for a class action against Merrill Lynch, Lift’s secured financier.
McGrathNicol would sue the United States-headquartered securities firm in a class action on behalf of Lift’s 1019 clients – who are owed $220 million – for the way it handled the Lift situation.
Under the other option planners could vote for the voluntary administrator to implement a deed of company arrangement (DOCA), McGrath said.
Voting for this option would boost returns to around 79 cents in the dollar, but creditors would give up the right to take class action against Merrill Lynch and Lift’s directors.
The returns would be higher as Merrill Lynch had agreed to inject $1.4 million into the pool of funds to be redistributed back to planners, on the condition that it not get hit by a class action by McGrathNicol on behalf of 1019 clients.
However, creditors would be allowed to sue Merrill Lynch in their own names.
Lift’s directors had offered to put $1.15 million into the pool and remove their own claims as creditors of $1.29 million if administrators proceeded with the DOCA.
McGrathNicol partners’ Tony McGrath and Joseph Hayes recommended the DOCA at yesterday’s creditors meeting in Sydney.
Planners have until mid-September to vote.
Lift went into voluntary administration on April 10. Merrill Lynch had sold $650 million of Lift’s stock to replenish the money it lent to the broker.
