The Securities Commission has launched an investigation into the 2006 promotion of the Credit Sails bonds scheme - which later collapsed and left investors $91.5 million out of pocket.
A separate Credit Sails investigation by the Commerce Commission, launched in September last year, is still under way but the commission recently declined to provide any form of update.
A Securities Commission spokeswoman contacted yesterday confirmed an investigation had been opened into "disclosure issues" surrounding Credit Sails, but declined to give any detail or speculate on a timeframe.
The 2006 Credit Sails bonds involved a complex portfolio of collateralised debt obligations based on the holding of corporate bonds and were issued by the Cayman Islands-registered Credit Sails Ltd, having been arranged by the French investment bank Credit Agricole through a subsidiary company, Calyon. The Credit Sails bonds were lead-managed and underwritten by southern-based broking house Forsyth Barr.
Forsyth Barr has said, while it had co-ordinated management of the issue, it was not responsible for its marketing or what was in the offer documents, which were produced by Calyon.
In 2006, Credit Sails offered investors an 8.5% annual return over six and a-half years, a capital guarantee and a Standard and Poor's AA rating, in a portfolio of mainly about 125 blue chip companies.
While it appeared a low-risk investment, it was in reality an extremely complicated investment vehicle.
With the onset of the global financial crisis, six companies of the 125 in the bond portfolio defaulted on loans, including Lehman Brothers, Washington Mutual, three Icelandic banks and Idearc, publisher of the United States' Yellow Pages.
Most of the defaulting companies were not registered in the original prospectus, meaning investors did not know to whom they were being exposed.
By late 2008, the Credit Sails bonds, which traded on the New Zealand debt exchange, were worthless after the remaining 119 companies' "good" bonds were sold to service the defaulted debts, meaning investors lost not only the interest advertised but their capital.
The original Credit Sails issue was set for $75 million, but because of investor demand that was increased to $100 million, with $91.5 million taken in total. Forsyth Barr was not required to pay any of the $50 million-$60 million it had underwritten.
The existing Commerce Commission investigation is into whether the product's marketing breached the Fair Trading Act.
