Council receives capital repayment on CDOs

During the month of February, Gosford Council received a capital repayment on seven of its CDO investments following the out of court settlement of litigation involving Lehman Brothers.

In total, Council received $13.68m from its initial $12.8m investment on the CDOs, according to the council's director of corporate services, Mr Nic Pasternatsky.

The seven CDOs comprised two Coolangatta, two Merimbula, one Endeavour, one Global Bank Note and one Miami.

Endeavour had matured in August 2011 and was not included in the number of securities held.

As at February 28, Council's Investment Portfolio had a market valuation of $55,358,306 and a face value of $64,182,722.

The face value of $64,182,722 was made up of $3,165,000 from the Coastal Open Space fund, $13,559,098 from the Combined Collections General Fund, $1,245,005 from Employee Entitlements, $5,294,270 from the Financial Strategy Projects Loan, $1,922,978 from the Financial Strategy Sinking Fund, $73,313 from the Gosford Foundation Trust, $12,428,337 from the Section 94 Contribution Plans, $2,564,569 from Security Deposits, $3,907,458 from the Somersby Industrial Estate, $52,826 from Unexpended Loans, $117,000 from the Trust Fund, $1,525,133 from the Property Development Reserve, $2,799,629 from the Combine Collections Sewer Fund, $3,046,547 from the Sewer Contribution Plans, $2,647,578 from the Combined Collections water Fund and $9,833,981 from the Water Contribution Plans.

Eleven of these were in the category of Restricted Assets and Reserves, totalling $39,829,321 while two were Unspent Loans with a value of $5,347,096 with the remaining three being Committed Funds and Unspent Grants with a value of $19,006,305.

According to Gosford Council's investment report of Tuesday, March 26, Council currently has a total investment market value of $55,358,306.24 which includes $24,193,013.54 of term deposits and $25,160,509.18 of cash accounts and 20 securities.

Council's total face value was at $64,182,722.06 which included $24,000,000 of term deposits and $25,160,509.18 of cash accounts.

Council's CDO, Capital Protected, FRN and Subordinated Debt and Senior Bond investments had a total market value of $6,004,783.52 and a total face value of $15,022,212.88.

Mr Pasternatsky reported that when compared to the previous month, all of the 17 structured securities currently held, showed an increase in their market value.

"The net market value increase for the period was $12,698,640, including the lump sum payout on the CDOs.

"These investments were previously valued at close to zero due to the uncertainty in relation to the legal action.

"The lump sum payout on the securities caused the portfolio's performance to surge in February, effectively reversing several years of declining value in those investments in one month.

"Without marked-to-market influences, Council's investment portfolio yielded 3.26 per cent per annum during the month.

"Removing the effect of the CDOs mentioned above, Council's portfolio yielded 4.51 per cent per annum during February.

"Council's investment strategy is continuously monitored in order to ensure that the investment returns achieved are maximised with minimum risk involved," said Mr Pasternatsky's report.

Gosford Council Agenda, COR.20, 26 Mar 2013