Connaught partner disputes default notice

Connaught partner disputes default notice


A specialist partner of the Connaught Income Fund Series 3 has been served with a notice of default despite co-operating with the fund’s administrators, it emerged today.

Agricultural finance lender UK Acorn Finance was served with a notice of default after failing to pay money due to investors of the Connaught Income Fund Series 3 due for the third quarter of 2012.


The notice was issued after Acorn met all obligations regarding outstanding payments of distributions to investors in the Connaught fund. 


Despite working with Connaught’s administrators to ensure that investors were repai

d their capital and interest in full, Acorn was issued with the notice over the outstanding non-payment of a management fee.


According to the fund’s administrators, this constituted an “event of default”, prompting them to serve Acorn with a default notice.


The agricultural lender has been given 20 days to repay the amount owed to C

onnaught’s management in full. 


B&C has exclusively learned, however, that Acorn has disputed the claim after the firm’s chairman, Peter Sobey, told us that

: “It is not correct to say that Connaught Asset Management (CAM) served a notice of default on UK Acorn Finance Ltd.”


He went on to say that: “Notwithstanding legal claims that Acorn has arising from the way in which Connaught operated, Acorn informed the Administrator of CAM that its primary aim was to recover the funds advanced in order to repay the investors capital and interest in full. 


“The Administrator of CAM agreed to put our proposals to Series 3 investors, whereupon the Administrator was promptly sacked from the role of fund Asset Manager. 


“Acorn continues to seek a meeting with all investors to enable the investors to consider the proposal as to how they will be repaid in full.


“Pending consideration of our proposals at a meeting of Series 3 investors, Acorn has made it clear that it intends to make funds available to pay the September interest payment to Series 3 investors (9% approximately), although not Connaught’s management fee. This position reflects the wishes of several investors and their advisers, representing nearly 50% of the value of the fund, who have contacted Acorn directly.”


Mike Davies, Chairman of Connaught Administration Services, said: “As the General Partner of the Connaught Income Fund Series 3 we have now written to all investors and advisers with clients invested in the fund.  In the letter we have provided an information update on Series 3 and expressed our thanks at the patience shown by both investors and advisers since the fund was suspended. 


“Up until the last quarter end the Specialist Partner to the fund, UK Acorn Finance ltd, had met its obligations to investors regarding the payment of distributions. However, as of the close of business on the 15th October, UK Acorn Finance ltd has not paid the amounts due to investors for the quarter ended 30th September 2012.


“The non-payment of the management fee constitutes an Event of Default and a Notice of Default was served on UK Acorn Finance ltd on the 16th October.  The Notice includes an immediate call-in of the loan book assets funded by Series 3 and gives UK Acorn Finance Ltd 20 days to repay the loan monies in full.  We are now awaiting a response to this notice.


“We will be writing to investors and advisers twice throughout November to update them.  By the 9th November they can expect to receive an interim update which will include a detailed analysis of the Fund’s loan asset portfolio, and by the 23rd November they will receive a letter outlining how we intend to wind-down the Fund in an orderly manner at as low a cost as possible.


“The amount of security held is considerably in excess of the amounts owed to the Fund, so we fully expect ultimately to make a full recovery of all sums due.  Once we have a response from UK Acorn Finance Limited to the notice we will be able to outline the exact steps and timescale for retrieving those monies.”


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