The Maitland-Newcastle
Catholic diocese will lose $12million because of the 2008 global
financial crisis, the diocese has revealed, reports The Newcastle Herald.
The figure was the expected ultimate loss after redemptions, defaults
and anticipated legal settlements in 2014, diocese vice-chancellor of
administration Sean Scanlon said.
‘The diocese joined a class action
against Lehman Brothers Australia some years ago,’ Mr Scanlon said. ‘As a
result ... the diocese expects to recover a substantial portion of the
failed investments.’
Mr Scanlon revealed the steps taken in late 2008 to protect Catholic
schools, parishes, religious congregations and individuals from losing
their investments after the diocese’s Catholic Development Fund was
exposed with $31million in Lehman investments.
The Lehman collateralised
debt obligations, or CDOs, represented 23per cent of the Catholic
Development Fund’s total $134million holding at that time.
CDOs are complex investments that repackage a bundle of individual
loans into a product that can be sold. In exchange for interest
payments, the buyer of a CDO takes on the risk that the initial loans
will not be repaid.
Australian churches, charities and local councils have been
successful in recovering up to 49¢ in the dollar of some of their
initial investments after court action showing many of the Lehman CDOs
were AAA rated in 2008, and promoted as safe investments.
The Catholic Development Fund, which operates to support the
charitable, religious, pastoral and educational works in the diocese,
held 11 CDOs in 2008.
When the global financial crisis occurred in
September 2008, the diocese purchased the 11 CDOs from the Catholic
Development Fund, at a cost of $31million, to protect the fund and its
depositors.
The fund lends money to schools and parishes.