Wingecarribee Shire Council has declared its finances are still in good shape, despite it losing $2.5 million selling an investment that was heavily exposed to the US sub-prime mortgage market.
The southern highlands council invested $3 million in Federation CDO, an investment it says it took on the advice of its then broker Lehman Brothers Australia. It is taking legal action to recoup that money.
But acting mayor and finance committee chairman Paul Tuddenham said the shire was still in a solid fiscal position, and would not be forced to sell any other of its investments, which total approximately $30 million.
"Council's liquidity is such that it would not be required to cash any of its other CDO investments before maturity," he said.
"This is a specific financial posture council has maintained and will continue to maintain."
"Although below value if they were sold today, history indicates that these types of corporate credit CDOs do not suffer significant defaults, returning to par when the individual investments reach maturity."
"We are receiving all of our interest payments at the agreed time and I have no reason to believe these strong investments will not return to their par value when the time comes for us to sell them," the councillor said.
"Because of council's financial strength there is no reason to contemplate cashing these investments before they mature."
The council has rejected claims a leisure centre project in Moss Vale has been jeopardised by the Federation CDO loss.
Councillor Tuddenham said funding for the centre was coming from the sale of existing land assets held by council, and some borrowings which did not include invested funds.
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