Chamber calls for loss details

The Peninsula Chamber of Commerce has called on Gosford Council to fully explain its investment risks to ratepayers following the collapse of US investment bank Lehman Brothers.

"The Peninsula Chamber is extremely concerned that both ratepayers and the business community are not being given full details on what investments are at risk and what investments have already been lost in the global credit crisis," Chamber president Mr Matthew Wales said.

"The level of information to date is not good enough.

"We are all entitled to know exactly what structured financial products have already been lost and what others are at risk.

"I'm sure this is very embarrassing for council staff and the councillors who approved the investment portfolio, but the time has come to be up front as to what the potential losses are."

Mr Wales said the chamber had written to council's general manager Mr Peter Wilson requesting details of the $74 million of offshore structured financial products and an assessment of the level of risk these investments face.

According to the Cole Report commissioned by the Federal Government, Gosford Council has a $74 million portfolio of collaterised debt obligations (CDOs) and similar financial products.

"At a time when businesses and our commercial centres are under extreme pressure, we need council to improve street cleaning and security and upgrade infrastructure," Mr Wales said.

"The new council is all about saying that they need to focus on the basics but will this be hampered by the recent financial crisis?

"Lost investments and reduced earnings from those that have survived must surely have an impact: To what extent should be fully disclosed to the public."

Council's director of corporate services Mr Nic Pasternatsky told Peninsula News that a report would be made to council about its investment situation at a meeting on November 4.

Mr Pasternatsky said the report was to be made at the October 27 meeting.

However, it was delayed until November 4, due to the Local Government Association Conference from October 25 to 29.

He said the council was in a position to withstand the "financial turmoil" from the global credit crisis.

"Lehman Brothers Holdings in the US has sought Chapter 11 protection allowing a bankruptcy court to supervise the reorganisation of its debt and contractual obligations," Mr Pasternatsky said.

"Gosford Council has used Lehman Brothers in the past as its investment advisors and council's only direct exposure is the $3 million capital guaranteed Lehman Global Property Note which matures in mid-2009.

"Despite the volatility in the global markets over the past 14 months, council continues to receive attractive cash returns on its investments.

"In 2007-08, council earned $10.3 million on an average principal of $127 million obtaining a return of 8.11 per cent.

Mr Pasternatsky said council's $22 million loan investment had a current market value of around $17 million.

"If we were to sell our investments, what we would be getting is a capital loss," Mr Pasternatsky said.

"We intend to wait until the global property note matures, collect it and put it into term deposits with the banks."

He said council was currently negotiating a detailed independent analysis of its entire portfolio to measure the impact of events in the US and the global economic market on its portfolio.

Press release, 3 Oct 2008 Matthew Wales, Peninsula Chamber of Commerce Clare Graham, 8 Oct 2008 Interviewee: Nic Pasternatsky, Gosford Council