Tuesday 29 March 2016 by Company updates

Court approval of S&P settlement – good news for IMF Bentham

The court approval of the S&P settlement is credit positive for IMF Bentham and is likely to generate an additional AUD47m profit before tax in the current financial year. In addition, successful settlement of the S&P matter is a key input for the liquidator paying out a AUD39m cash receivable from the Lehman Brothers case.


On 24 March, the Federal Court made orders approving the settlement of the S&P class action. No objections were made by any group member, including S&P. IMF intends to book AUD47m of profit before tax in FY16 in relation to this matter.

The settlement if completed is significantly greater than the average net revenue contribution of IMF’s historical settled cases of around AUD3m. The profit uplift of AUD47m represents up to 59% of total gross debt outstanding post bond issue, assuming a AUD30m new bond issue.

We note there remains a risk that the settlement deed does not become fully effective. This could happen if an appeal is made and is successful within the appeal period. However, there were no objections raised to the orders by any group member including S&P. As such, we see the risk of a successful appeal as very low at this stage.

We also refer to the following points outlined in page 9 of the IMF new issue research report:

  • The settlement of the class action against S&P is one of the variables affecting the timing and amount of distributions from Lehman Brothers Australia (LBA). The execution of the settlement deed is a significant step towards the resolution of the class action and reinforces IMF’s confidence in the liquidator’s estimated distributions from LBA. Recent reports by the LBA liquidator indicate that the dividend from LBA is now estimated to be approximately 80 cents in the dollar. If estimates about the amount and timing of future dividends come to fruition, IMF expects to receive AUD39m in further recoveries (being the AUD25m non current receivable in the 30/6/15 financials plus an additional AUD14m)
  • Both cases above (S&P and Lehman) translate to expected cash inflows of AUD91m over 2016 and importantly validate IMF’s case control after a longer than expected period of not winning major cases


The court approval of the conditional settlement claim against S&P represents a material de-risking of the S&P matter and the likelihood of a successful settlement is now considered very high. We consider this announcement as credit positive, noting the potential for a positive outcome on the S&P matter was flagged in the research report.

If both the S&P and Lehman’s matters both successfully settle in line with the expectations set out above, we would view this as materially credit positive with expected cash inflow generation of AUD91m over 2016.