The collapse of the US investment bank Lehman Brothers has implications for the Singleton Council’s CDO (collatoralised debt obligations) in Corsair(known as Kakadu) which has exposure to the failed bank.

Singleton Council’s finance manager Anthony Egan said they were waiting for a report from their financial advisers and were trying to ascertain the actual impact on the product.

“Our last advice from the brokers was to hold the product, but that was prior to the event,” she said.

Mr Egan said he was expecting a report from them within the next few days, but he wanted to make it clear that Singleton Council was still operating as usual.

“Yes, we have one CDO that has been exposed to Lehman Brothers in our portfolio but there is sufficient liquidity for our ongoing operations,” he said.

He said the financial situation in the United States was going to impact on anyone with investments.

“The value of investments is decreasing and we don’t know where its going to stop,”

“This is new territory.” he said.

Mr Egan said the financial markets were a global economy and that all investments would be affected in some way by the slowdown.

“But the way the products (CDO’s) are structured there is a high chance we will not lose any money, and we are still being payed a dividend, but the market will impact on the value of the product.”

“These products are designed to withstand up to ten credit events before the product becomes worthless,” he said.

“This is only one credit event.”

Prior to the US ‘sub-prime’ crisis numerous Hunter Council’s took up the CDOs being promoted by financial institutions such as Lehman Brothers.

While the CDOs are not directly at risk, economists predict their value is likely to decrease significantly.

The Australian sharemarket fell to its lowest level this week in more than two and half years in the wake of the turmoil in the US market.

A drop of 1.5 per cent is modest compared with the 4.4 per cent decline in the US market following Lehman Brother’s bank filing for bankruptcy earlier in the

Other Hunter Council’s affected by the collapse include Port Stephens who have substantial investments in Lehman brokered investments and Cessnock Council.

Mr Egan conceded that it had been an ‘interesting’ 12 months financially, and the next 12 months was shaping up to be even more interesting.