It has just been revealed that funding provider to some 18 per cent of the bridging industry, Connaught Asset Management, is to temporarily suspend applications into and redemptions out of its Income Fund Series One.
This decision has been taken while a detailed review of the assets takes place. The ongoing review has revealed that some loans may be under-secured which would have an impact on the NAV per unit in the fund.
The fund finances a significant proportion of Tiuta Plc’s loan book and the suspension decision will have no effect on the current loans that utilise the fund.
Investors have been advised that the decision to temporarily freeze the fund will have no adverse effect on their investments within Series One as the suspension is merely a diligent measure by Connaught in order to protect all investors’ investments.
Explaining the decision further, Mike Davies, Chairman of Connaught Asset Management, said: “Our decision to temporarily suspend applications into, and redemptions out of, the Connaught Income Fund Series One has been taken while a detailed review of the assets being used as security for the loans in the Fund is on-going. The review has so far highlighted the possibility that a small percentage of the loans may be under-secured, which means if all assets were sold immediately to repay the existing loans there could be a shortfall. This potential shortfall would have an impact on the NAV per unit in the Fund.
“We therefore need to investigate fully in order to determine the true NAV and in order to complete this review we have acted immediately and prudently by making this decision to protect investors’ capital values. Any potential shortfall will be covered by the Specialist Partner for this fund, Tiuta.
“As stated, this is a highly prudent approach and is in no way a reflection on the current performance of Tiuta or the fund. Instead it is a course of action to make sure there can be no doubt that all of the loans are fully recoverable. All distributions from the fund will continue to be paid as normal during the review period and we believe Tiuta are able to generate sufficient additional capital in order to provide the cover for any potential shortfall.
“While this is not a course of action we wanted to take, we believe it is absolutely necessary in order to protect our investors’ investments. This decision has been taken in agreement with the Fund Operator and the Directors of Connaught Asset Management and Connaught Administration Services. We anticipate the review will take a further four weeks to complete after which we will be communicating again with all investors.
“We would also like to point out that this decision only affects the Income Fund Series One and has no impact or bearing on any other Connaught product.”
Steven Nicholas, Chief Executive of Tiuta Plc, added: “As Connaught has pointed out we are undertaking this prudent course of action in line with the results of the recent review. To do otherwise would certainly not be in the interest of our stakeholders and we see no issues at all in covering any potential shortfall. This is very much a legacy issue regarding some of the earlier loans – these assets have not recovered their value following the major economic upheaval we have witnessed during that time. In terms of Tiuta’s current performance, we are now a much leaner and efficient operation than back then and our recent lending activity is something we are all proud of. In effect it is business as usual for Tiuta and we are ensuring that all issues are dealt with as quickly as possible.”
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