City Pacific ignores default and debenture obligations

Investors in the debentures and unsecured notes of the City Pacific First Mortgage Fund continue to rank last, and ignored, in the decision making at the manager and related lender City Pacific.

Commonwealth Bank and the few favoured developers financed through City Pacific continue to enjoy preference in payments from the many-months-ago-in-default carcass of this Gold Coast-based property financier.

The latest epistle from Phil Sullivan, managing director of City Pacific, to the Australian Stock Exchange, yesterday declared the City Pacific First Mortgage Fund, as a "non-liquid fund". He wrote that the fund would make no more effort to pay much delayed redemptions in late February 2009.

Rather, investors will have to wait, "subject to available funds and dependent on interest received on loans."

Moreover, Sullivan wrote, the fund would continue to make payments to its financier, CBA, and also to "meet the funding obligations to existing borrowers".

The fund will "continue to have the ability to make new loans" and Sullivan even contemplates raising new funds.

City Pacific's board has a couple of new directors as of two weeks ago, including Philip Downie, a former partner in Coopers & Lybrand and who served for six years as chair of Brisbane Lions Football Club.

Downie appears to be appointed at the instigation of CBA, which might have City Pacific in a form of soft receivership.