Breaking News
Council loss worse than predicted
Chelsea White
19 February 2008
THE real cost of Manly Council's investment debacle has been revealed with funds manager Lehman Brothers costing $1.3 million in share losses according to latest figures.
The portfolio's performance is so bad that not a single investment made on Lehman's advice is worth what was paid for it.
The investment bleeding has doubled just five months.
Last night in a Manly Council update it was reported its embattled investment bundle Federation collaterialised debt obligation was worth only $84,215 despite originally costing $500,000.
Federation has been reported to be worth even less than this.
This is likely to drop further with Lehman estimating ratings agency Standards and Poors will soon re-rate Federation from AA to CCC, with further devaluing possible.
As Manly's investments continue to fall the council has rejected a bail out plan by Lehman on Federation.
The offer involves the council entering a long term commitment; it would have to invest almost three times its initial outlay.
General manager Henry Wong said the council want nothing to do with Lehman or their products.
``We are still committed to holding the securities till maturity but we don't want to get involved with Lehman further,'' he said.
The council is also watching the Federal Court action taken by Wingecarribee Council who are alleging Lehman engaged in false and misleading conduct.
A Lehman Brothers spokesman rejected the claims.
``Ultimately every investor is responsible for their own due diligence, but we do spent a lot of time and expend a lot of effort with our clients ensuring that the risks are clearly understood and outlined,'' he said.
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