So far, most funds have been able to navigate recent liquidity or performance challenges. However, we are identifying a number of funds which are exhibiting signs of stress, particularly across the real estate and distressed debt sectors. As government financial and legal support tapers off in the coming months, we expect to see greater stress amongst funds but further opportunities for others.
Funds which have reached the end of their lives and are already in wind down are often not providing the best value for shareholders. This is due to the combination of a lack of management resources and expertise to focus on the wind down (given competing priorities from active funds), illiquid or complex assets, and fee structures which are out of step with a wind down scenario. Consequently, we are seeing directors and fund managers taking steps to appoint liquidators at an earlier stage in the wind down. This allows for more innovative fee arrangements to be agreed to and alternative or expedited asset realisation strategies to be followed in order to generate a better return for investors.
Where funds themselves encounter difficulty we also help GPs, or conversely investors and LPACs, on fund restructuring, M&A, fund extensions or solutions for exiting end of life funds.
Appointed as provisional liquidators of a Dubai based, Cayman registered c.$5bn emerging market PE fund manager.
Our primary focus was to stabilise the management platform and either:
Transition the rights to a third party manager, or;
Continue with an orderly exit of the portfolio companies and return capital to investors.
Work focussed on managing 600+ investors, maintaining operational stability across four continents, investigating misconduct allegations made by investors, selling the business, managing assets, chairing the global Investment Committee for key decisions, and downside protection strategy.
Liquidation Outcome Analysis
Engaged by an African banking Group (headquartered in the BVI) to support restructuring negotiations.
The Group had entered a standstill agreement with certain of its creditors while looking to dispose of its investments in seven banks across Africa.
As part of the Group’s negotiations, we were engaged to evaluate the likely liquidation scenario in the event that the Group entered liquidation and assess the likely outcome to creditors in such a scenario.
Our work involved an assessment of the Group’s complex debt and security structure, the likely impact of any liquidation on the underlying investments and the risk and impact of regulatory intervention.
Administration/Forensic Investigation
This group of companies included a regulated investment fund, fund manager and an independent financial adviser. After concerns were raised by the US regulator regarding potential regulatory breaches, the regulators in the Channel Islands undertook their own reviews and identified further concerns regarding the operation of the fund and recoverability of assets for investors.
We were approached by the Guernsey Financial Services Commission to act as administration managers of the fund and the manager and liquidator to other group entities.
We undertook an initial forensic investigation and quickly identified that the fund had not deployed investors’ monies in line with its offering documents. In conjunction with our legal advisers, potential claims were identified against the company’s former auditor. Given the lack of assets in the fund, we secured third party litigation funding to pursue this claim which remains the only prospect of investors recovering any of their investment.
