Investors have voted overwhelmingly in favour of placing the Connaught Income Fund Series 1 into liquidation.
At an investors’ meeting at the National Exhibition Centre in Birmingham on Wednesday, over 92 per cent of investors present at the meeting chose a formal insolvency process to wind down the unregulated collective investment scheme, which at one stage was £118m in size.
At the meeting, investors also chose to replace BDO as the administrator of Tiuta International Limited, the arm of Tiuta plc which used £105m of Series 1 funds as a funding line, and to replace the firm with Duff & Phelps. Tiuta International entered administration last month with the loan books sold to Connaught for £1.
Connaught Asset Management had the casting vote and chose to honour the wishes of investors in appointing D&P as the fund’s liquidator.
Investors were faced with three options regarding the future of the Series 1 fund. Around 6.5 per cent voted for an informal wind down of the fund and around 1 per cent voted for a formal termination without an insolvency process. Both of these options would see asset manager Connaught Asset Management, general partner Connaught Administration Services and fund operator Blue Gate stay in control of the fund. A formal insolvency process is likely to be more expensive but it is more likely to allow investors to find out more about the downfall of the fund.
Investors were also presented with three options regarding the future of the TIL administration. Around 3.7 per cent of investors present at the meeting voted to keep BDO as administrators, 13.2 per cent voted to appoint a joint administrator and 82 per cent voted for a new administrator entirely. Some 89 per cent of that 82 per cent wishing to appoint a new administrator chose Duff & Phelps. Around 63 per cent of investors in the fund were present at the meeting.
The Series 1 fund was suspended in March and interest payments were not made. A review was commissioned to ascertain its true value.
Last month, Mortgage Strategy’s sister publication Money Marketing revealed investors faced losses of up to 50 per cent. An independent review by Duff and Phelps suggests a best case scenario whereby £53.2m might be recovered from the £105m invested. A worst case scenario outlines the prospect of only recovering £46.5m.
A decision to wind down the Series 1 and a separate £18m fund called series 2, which was used to fund another Tiuta subsidiary called Tiuta Development Finance, was made in June. A Series 3 fund, which was not linked to Tiuta loans and raised around £22m, was wound down in July due to a spike in redemptions.
CAM chairman Mike Davies says: “We have worked closely with Duff & Phelps for some months, having appointed them as the independent adviser to the fund in Suspension, and we will continue to willingly co-operate with them in their appointment in realising the clear wishes of the Investors and in maximising the recovery of their capital.”
Last month, Mortgage Strategy’s sister publication Money Marketing revealed Tiuta PLC made a pre-tax loss of £37.8m for the 18 months to 30 September 2011 after suffering heavy loan book losses.
The FSA issued a warning to people who have invested in the Series 1 and 2 funds in May 2011. The regulator said it believed the way they have been advertised could be misleading. They were described as “very low risk” and “low risk” in product literature, making comparisons with placing money in a high street or building society bank account. Connaught changed the literature after the announcement.