The list of victims from the collapse of payments system group Bill Express is growing beyond shareholders, creditors and employees to include Allco Finance Group and bond holders of the Mobius ELR-01 Trust.
The list of victims from the collapse of payments system group Bill Express is growing beyond shareholders, creditors and employees to include Allco Finance Group and bond holders of the Mobius ELR-01 Trust.
The potential $15 million in losses for the bond holders will be on top of the $53 million written off today by ANZ and $110 million owed to four major telecommunications companies. It is believed creditors will be lucky to get 3 cents in the dollar.
One positive thing that may flow from the debacle is clarification of the legal status of so called “hell or high water” leasing contracts that underpinned the equipment deals backing the Mobius ELR-01 Trust. A “hell or high water” leasing contract means the lessor is liable even if the equipment does not work.
It has been a tenet of the securitisation industry that trust vehicles are designed to quarantine bond holders from the administration or liquidation of the company providing the income. Bill Express appears to have turned that on its head.
Unfortunately, the court testing of the “hell or high water” contracts will involve Mobius Financial Services, a subsidiary of Allco, suing about 2500 newsagents who have been left with electronic payments equipment that no longer works.
When the newsagents signed up with Bill Express they were told they also had to sign up with an associated company called Technology Business International, which supplied the equipment. TBI is now in liquidation.
Mobius notified newsagents on 18 July, via the Australian Newsagents’ Federation, that they are still liable to pay the $495 monthly lease charges.
It is believed that Mobius has continued to debit the accounts of newsagents who gave direct debit authorities to TBI and had not yet cancelled them.
However, there are now suggestions that the original contracts were illegal.
Mobius told ratings agency Fitch Ratings that the ACCC was investigating the contracts for alleged misleading or deceptive conduct.
Fitch said an adverse finding by the ACCC had the potential to affect noteholders negatively.
A spokeswoman for the ACCC refused to comment. But a lawyer acting for the NSW and ACT Newsagents’ Association (NANA) said it was possible that Bill Express and TBI had engaged in third line forcing.
NANA has advised all newsagents not to pay the money owed to Mobius. It is considering a class action.
There are five classes of notes worth about $65 million in the Mobius ELR-01 Trust as well as a reserve of about $1.8 million. Fitch says the reserve as well as notes E, D, C and most of the B class notes will be wiped out if the newsagents don’t pay up.
A list of frequently asked questions distributed to newsagents by the ANF last week said that there would be no penalty for early repayment of the contracts, but the equipment remained the property of TBI.
Ratings agency Moody’s said last week that Mobius is in the process of transferring its functions as trust manager to Pepper Australia and this is due to be completed by the end of August.
Meanwhile, in a strange twist to the Bill Express saga, ANF today said chief executive Don McAskill “has left the ANF” and this was “effective immediately”. The ANF said it would conduct a search for a new replacement as quickly as possible.
This article first appeared on Business Spectator
Related stories:
Smart Company is a sister publication to The Mandarin, catering to Australia’s entrepreneurs, small and medium business owners and business managers.
