CityPac lets go of flagship fund
Sydney Morning Herald
Wednesday July 22, 2009
CITY PACIFIC has conceded defeat in its battle to keep management control of the $630 million First Mortgage Fund, leaving the stricken Gold Coast finance group without a steady income and at the mercy of the Commonwealth Bank, which it owes $100 million.Yesterday the company agreed to hand electronic files and paperwork related to the First Mortgage Fund to Balmain Trilogy, the rival financial group which won enough support from the fund's 11,000 unitholders last month to replace City Pacific as its new responsible entity.The move comes after the Federal Court on Monday threw out a legal challenge by City Pacific to have the vote ruled invalid on technical grounds.Trilogy Capital's executive chairman, Rodger Bacon, said his group hoped to begin its legal and financial audit of the fund as soon as possible. "It will take a few days for us to get everything started. Getting the files is the first step," he said.City Pacific did not return the Herald's calls. There are doubts over whether the company will ever re-emerge from its week-long trading halt.The fund represented the bulk of City Pacific's earnings. It generated $30 million a year in management fees until City Pacific tried to appease unitholders by lowering the fees. But this did not stop a majority from supporting Balmain Trilogy, which offered even lower fees.Meanwhile CP1, a developer managed by City Pacific, said it had submitted a proposal to the undisclosed financier of its $650 million Martha Cove marina development that had served it a letter of non-compliance in June.CP1 is 20 per cent owned by a company controlled by City Pacific's founder and former managing director, Phil Sullivan. He repurchased the stake from the construction entrepreneur Daniel Grollo last month. It is unclear how much Mr Sullivan paid for the stake. The company's shares have fallen from $1.20 to 1 cent.One concern for unitholders in the First Mortgage Fund is that it is owed an estimated $80 million by CP1's Marina Cove development. The fund is owed well over $200 million by developments managed or linked to City Pacific, and more than 90 per cent of its loan book is in default.
© 2009 Sydney Morning Herald
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