Wednesday, 12 July 2017

New Earth fund liquidators may chase third parties


The offshore investment fund which pumped over £39 million into a firm of insolvent waste management contractors commissioned by Scottish Borders Council has recouped just £364,967 of the losses thanks to a derisory 1.5 pence in the £ dividend from the administration estate.

Details of the 'windfall' are included in an update for creditors and investors in the Manx-based New Earth Recycling & Renewables [Infrastructure] fund (NERR) from joint liquidator Alex Adam, of insolvency specialists Deloitte. The NERR investment vehicle, part of Premier Group (Isle of Man) Ltd. was meant to supply the £21 million needed to develop and construct a waste management facility to deal with Borders household rubbish.

But instead of funding the project at the site of the Easter Langlee tip on the outskirts of Galashiels between 2011 and 2015, NERR was too busy propping up cash strapped New Earth Solutions Group (NESG), the waste 'specialists' handed a £80 million contract by Borders councillors.

The local authority and its collection of expensive consultants appear to have been completely unaware that NESG was millions of pounds in hock to banks and unsecured creditors while NERR was providing millions of pounds in management fees for Premier Group directors who also had a major stake in NESG.

The outcome of the Galashiels fiasco was a £2.4 million loss of taxpayers' money with an undisclosed financial disaster for NESG also likely to have run into millions. The Group crashed into administration last year after the Borders contract was terminated: NERR is being liquidated and Premier Group is being dissolved.

Mr Adam's investigations into NERR, according to his newly published report, are focusing on specific issues "where we believe a claim could be brought against third parties".

He says: "We have continued, in conjunction with our legal advisers, to review the information we have obtained from a variety of sources, with the objective of determining whether there are good prospects of bringing, and ultimately winning, actions against third parties.

"However, we do not wish to prejudice any potential claim by providing further detail at this stage. Whilst we are focusing on those issues which we have identified as having the greatest prospects of success we have not discounted other possible claims".

It should be remembered that the collapse of NERR, which once claimed a valuation of more than 290 million American dollars, and whose controllers told Scottish Borders Council that cash was pouring into the fund at the rate of £6 million per month, means 3,249 investors and shareholders have virtually no chance of recovering any of their money.

Mr Adam explains that shortly following the winding up of NERR he submitted a claim to NESG administrators Duff & Phelps for amounts outstanding to NERR in relation to the loans made to NESG.

"That claim has recently been accepted by the administrators who have paid a first and final dividend of 1.5 p in the £ to all unsecured creditors in the administration estate", the report shows. "As a result the company (in its capacity as a creditor) received a distribution of £364,967.

Mr Adam goes on to state: "For clarification, the dividend paid by NESG is a realisation in the liquidation estate of NERR which equates to less than 0.1% of the estimated shortfall to creditors and investors (before the costs of the winding up) of the company and two related funds shown in the directors' statement of affairs.

"As the costs incurred to date exceed the dividend received, the receipt of the dividend will not result in a distribution to creditors or shareholders of NERR. We still believe that any substantial recovery will depend on identifying and then successfully pursuing claims against third parties".

So the financial horror show linked to Scottish Borders Council's disastrous dalliance with NESG, NERR and Premier Group continues with the potential for more disturbing if not sensational disclosures yet to come.

The toothless watchdogs tasked with monitoring public authorities' conduct in spending other people's money may not be interested in this particular scandal with its distinctly shady undertones. The regulatory authorities may not wish to hold anyone to account for the loss of that £2.4 million.

However, Not Just Sheep & Rugby will continue to analyse and report future revelations just as we have done since the Easter Langlee deal was abandoned with extremely costly consequences in February 2015.

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