The board of Connaught Asset Management is proposing to wind up its income fund series two and Mortgage Strategy understands the same process is being applied to its series one fund, both of which partly fund bridging lending Tiuta.
Connaught announced in May that it had contacted investors to tell them the fund was unable to pay their scheduled quarterly interest payments after Tiuta told the asset manager it would be late paying its own interest payments.
It was looking to resume normal dealing on the fund by May 14, but the firm’s board of directors agreed at a meeting on May 21 to continue the suspension of the net asset value of the fund and the issue and redemption of units in the fund.
Connaught believes that by bringing the funds into the investment adviser’s group and under its control it will significantly assist in the winding-up process and the realisation of the fund’s investments, with a view to maximising unit-holder returns.
Connaught is proposing to acquire the entire issued share capital of series two from Tiuta. It is also believed to be acquiring the share capital of income funds series one – an estimated £118m, but this has not been confirmed by Connaught.
Series two is made up of £12m in securitised assets and £5m in cash. In light of the proposal to wind up the fund, the annualised interest rate payment to unit holders scheduled for July 2012 will not be paid.
And as any future dealing in the fund is unlikely, the administrator will be returning any subscription monies held by it pending the next dealing day to applicants.
The Financial Services Authority issued a warning to investors in the two funds in May 2011, saying it believed the way they were advertised may have been misleading.
Tiuta revealed last week that it has secured new funding from an unnamed London investment fund. As a result, it has launched a product range for loans between £1m and £25m, starting at 8% per year.
The deals are for high-end development properties in central London and the South-East, and Tiuta will lend up to 70% of the property’s cost up to a 15-month term.