Unregulated New Earth funds facing liquidation

Added 17th June 2016

Joint liquidators have been appointed to the New Earth Group of Funds following an application by the Isle of Man Financial Services Authority (IOMFSA). The application was made with the knowledge and consent of the funds’ directors.

Unregulated New Earth funds facing liquidation

On 9 June the High Court of Justice of the Isle of Man ordered the provisional appointment of Sarah Sanders and Alex Adam of Deloitte as joint liquidators.

A further hearing is scheduled for 12 July 2016, at which time the court will determine whether or not the company should be placed into liquidation.

The New Earth Group of Funds offered three collective investment schemes:

  • New Earth Recycling and Renewables (Infrastructure) (NERR), an Isle of Man specialist fund;
  • Premier Investment Opportunities Fund (PIOF), an Isle of Man qualifying-type experienced investor fund; and
  • Eclipse Investment Fund, an Isle of Man qualifying fund investing into NERR.

Debt and losses

IOMFSA’s application relates to the position of two companies into which New Earth Group are almost wholly invested.

“It therefore remains unlikely that the sale of these assets will generate a return for the fund.”

NERR is the majority shareholder of two entities: waste treatment services firm New Earth Solutions Group (NESG) and New Earth Solutions Facilities Management (NESFM), which focuses on projects to recover low carbon renewable energy from waste derived fuels.

Financial statements for NESG and NESFM posted on the Channel Islands Securities Exchange on 20 May 2016 show large debt positions and operating losses. 

NERR, along with NEFM and NESG, has been working for over 12 months with a developer to save the two companies and achieve shareholder value for the New Earth Group of Funds.

However, on 26 May the directors of NESG and NESFM filed a notice of intent to appoint an administrator with the High Court of Justice Chancery Division in England and Wales. As UK companies they sit outside the remit of IOMFSA. Duff & Phelps were duly appointed.

Companies sold, investors lose out

In letters to NERR and PIOF shareholders dated 16 June, the manager of New Earth Group, The Premier Group, advised that “the New Earth Group of Companies have sought statutory protection by filing notice to appoint an administrator. The administrator has moved quickly and has sold [NESG and NESFM] to DM Opco, the full details of which are unknown.

“Taking into consideration that the assets of NERR are largely subordinated to the senior lenders’ debt, the directors consider it unlikely that the sale of these assets to DM Opco will achieve over and above the amount of senior lending.

“It therefore remains unlikely that the sale of these assets will generate a return for the fund.”

Unregulated, non-retail funds

Specialist, qualifying and qualifying type experienced investor funds are unregulated collective investment schemes which are not approved or reviewed by IOMFSA. Once launched the funds must be registered with the authority within 14 days.

These types of funds cannot be sold to the retail public.

Access to such funds is only available where investors confirm that they meet the fund type’s minimum entry criteria. This includes a statutory certification that they have read the scheme’s offering document and understand and accept the specific risks associated with that type of fund.

IOMFSA’s remit for such schemes is to register, receive notifications of changes, and supervise their appointed Isle of Man functionaries. 

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About Author

Kirsten Hastings

Senior Reporter

Kirsten is a senior reporter for International Adviser, covering global news stories about the financial services industry. She joined Last Word Media in October 2015 after two years working as a reporter covering the staffing and recruitment industry. Kirsten has a Masters in Financial Journalism from the University of Stirling. 

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