Thousands of investors in the failed investment product
Credit Sails received good news yesterday, following an
agreement which will see them paid back 85% of their money.
As part of a settlement between the Commerce Commission and
the five companies associated with Credit Sails, the
companies agreed to create a settlement fund of $60 million
to be distributed to investors who lost money when Credit
Sails failed in 2008.
The money would be available from March.
More than 3000 investors bought Credit Sails, most of them
were retail investors with a limited understanding of complex
financial products. A significant number of investors were
now aged 70 and over, commission chairman Mark Berry said.
The companies involved in establishing the fund were Forsyth
Barr Ltd, Forsyth Barr Group, Credit Agricole Corporate and
Investment Bank, Credit Sails Ltd and Calyon Hong Kong Ltd.
Credit Sails were sophisticated debt securities marketed and
sold to the New Zealand public in 2006 with the prospect of
8.5% interest income and capital protection.
The commission said $91.5 million was raised through the
offer. Credit Sails failed in 2008 and the notes were now
virtually worthless, it said in a statement.
On the information available, the commission estimated the
total loss for those eligible for a share of the settlement
fund was around $70 million.
The companies had not admitted liability and did not accept
the commission's views on the matters, Mr Berry said.
Forsyth Barr managing director Neil Paviour-Smith welcomed
Credit Agricole CIB (formerly Calyon) and Forsyth Barr had
paid $60 million which would be held in a trust account from
which payments would be made to eligible investors.
''Since the failure of Credit Sails ... we have worked
tirelessly and applied considerable resources to work with
the trustee, Calyon, and subsequently Credit Agricole CIB,
the Commerce Commission and other regulatory authorities to
examine why the product failed and also whether anything
could be done to restore investors' capital.
''We have worked hard to achieve a really positive outcome
for investors, many of whom had written off the investment.''
The payout was generous and recognised the extraordinary
market turmoil during the global financial crisis, Mr
The payout also recognised a desire to find a timely solution
to the commission's investigation and the risks investors
assumed by subscribing to the offer.
Forsyth Barr did not accept the commission's views that some
representations might have been construed as having breached
the Fair Trading Act. However, proceedings arguing the case
would have taken a considerable amount of time and would have
come at considerable cost to all parties, he said.
Arguing the case would have prolonged the settlement and
provided no certainty to investors who, like Forsyth Barr,
were keen to put Credit Sails behind them.
''This is a significant settlement for us but Forsyth Barr is
a long-established well-capitalised firm. Our share of the
settlement was paid last week and we now look forward to
assisting with the distribution of funds to eligible
investors,'' Mr Paviour-Smith said.
Commerce Commission's views on Credit
• The representations that Credit Sails were "capital
protected'' were misleading and deceptive.
• Credit Sails were marketed to the average investor.
• Credit Sails were highly complex and unsuitable for the
• The companies who marketed and sold Credit Sails ought to
have known the product was unsuitable for the average