Tuesday, 28 March 2017

Desperate attempts to save bankrupt fund


Last-ditch efforts seeking to prolong the life of a bankrupt investment fund which had committed multiple contraventions of financial regulations were rejected by an Isle of Man court, according to a newly published judgement which ordered the entity should be wound up and liquidated.

Not Just Sheep & Rugby has been following the (mis)fortunes of the Eco Resources Fund [ERF] and its stablemate New Earth Recycling & Renewables [NERR] since they encountered catastrophic financial difficulties last year. Both funds were run by Premier Group (Isle of Man) Ltd. (also in liquidation),which was a major player in the New Earth Solutions Group (NESG), now in the hands of administrators with debts running into tens of millions of pounds.

NESG and NERR were handed a £80 million contract by Scottish Borders councillors in 2010/11, including the development and funding of a major waste treatment plant and energy recovery facility at the site of the region's landfill tip on the outskirts of Galashiels. The venture was a complete failure and resulted in a £2.4 million loss for Borders council taxpayers.

Insolvency experts Deloitte's are currently investigating the collapse of the NERR fund; administrators are carrying out a similar exercise at NESG, a liquidator has been ordered to probe the affairs of ERF and the Premier Group has also ceased trading with a liquidator appointed too. A quadruple whammy representing huge losses for various groups of investors and shareholders.

The petition to wind up the ERF - it concentrated investing in bamboo plantations -  from the Isle of Man Financial Services Authority (IOMFSA) included claims that the Fund had been left with a management vacuum, exacerbated by the withdrawal of its directors, administrator, manager and custodian.

According to IOMFSA: "The defendant [ERF] has very considerable - apparently insurmountable - liquidity problems which has been the position for some time. Decisive action is required so as to protect the interests of third parties, investors and creditors."

The court was told in a report from one financial expert there had been a catastrophic mismatch between liquidity terms offered to investors versus the liquidity associated with the underlying assets class.

IOMFSA also pointed out that the Fund was in breach of the Companies Acts and in multiple breach of the Collective Investment Scheme Regulations, including the lack of audited accounts for the period since the end of 2014.All redemptions from the fund had been suspended since April 2015, added IOMFSA.

"There is confusion as to whether the defendant will be able to recover anything from its investments due to security having been apparently granted to a third party over the underlying bamboo plantation assets.

"It is desirable that insolvent companies be wound up in order that the causes of insolvency are determined. The circumstances which have caused or contributed to the defendant's present situation require investigation."

It has been revealed that the day before the court hearing an application was filed on behalf of Premier Group, a creditor of the ERF asking for the IOMFSA claim form to be adjourned for two months.

Deemster David Doyle, the judge in the case, heard that Premier's liquidator had recently been made aware of efforts dating back to December 2016 by John Bourbon (a Manx businessman whose interests included a directorship of Premier Group) to put together a rescue package for the ERF.

According to Deemster Doyle's written judgement: "There are some generalised references to a meeting in New York between Mr Bourbon and others for some long-term funding. There is also reference to a Mr Mike Richardson (also a Premier Group director) brokering an arrangement which sees a South African family office providing short-term finance of $1.9 million."

But Judge Doyle dismissed the application for an adjournment. He states: "There has been reasonable time for a rescue package to have been finalised. The position was covered in very vague, generalised and somewhat belated terms. There has been sufficient opportunity to put before the court detailed evidence in respect of any rescue package. I cannot allow the extremely unsatisfactory position in relation to this company to drag on any longer.

"The defendant has no officers. It has no directors. It has no secretary. It has no manager. It has no administrator. It has no custodian and it appears that a statutory demand in the region of some £2.4 million has not been paid. There are also serious concerns in respect of arrangements with Sustainable Assets Lending LLC (a US-based company) and how the defendant has arrived at the position it is now in.

"These important issues have been outstanding for some considerable time. The defendant cannot in the circumstances be permitted to continue in existence without the appointment of a liquidator to look after, and to look into, its affairs and to take any necessary action.".

No comments:

Post a Comment