Investors wary of ‘disastrous’ deal to save stricken IoM fund

Added 11th August 2017

A proposed rescue package to save Quadris, an Isle of Man fund that invested in Brazilian forestry, would be a disaster for shareholders the director of an expat financial advice firm has warned.

Investors wary of ‘disastrous’ deal to save stricken IoM fund

The Quadris Environmental Forestry Fund was launched in 2001 and had more than £100m ($130m, €110m) from 1,200 people invested in the teak plantations in Brazil, managed by a company called Floresteca.

The minimum investment was $50,000. 

The company posted a $20m loss in 2016, with auditors raising significant concerns about the company’s ability to continue as a going concern.

It was left fighting for survival in July after US hedge fund Crestline declared the fund was in default of its loan and called in the receiver.

Proposed rescue

According to newspaper Isle of Man Today, following a meeting with Crestline at its offices in Texas; Gordon Wilson, who was appointed controller of Quadris by the Isle of Man Financial Services Authority (IoMFSA) in February 2017, wrote to investors with a proposal to save the fund.

Wilson told them that an agreement had been reached in principle on a way forward but that it would involve compromises.

Under the plan, Crestline’s debts will be reset to $41.2m as of 1 June 2017 in order to remedy the default.

Certain loan covenants will be relaxed and an independent valuation of the underlying assets will be carried out, which will take 10 to 12 weeks to complete.

If the measures are approved and successfully completed, Wilson says the receiver and controller will stand down and a new board will be constituted.

Further details are expected at the end of August or early September.

“In the meantime, compared to all other alternatives in current circumstances, we believe this arrangement is by far and away in the best interests of the fund and all of its stakeholders,” Wilson wrote.

Disaster for shareholders

Wilson has been accused, however, of trying to claim victory in defeat by Stephen Metcalf, a Warsaw-based partner at Synergi Investment representing £7m of investment in Quadris.

He told IOMToday: “This would be a total disaster for shareholders and a complete capitulation to the demands of Crestline.

“Based on the recent sale of Floresteca assets it would leave fixed income investors with nothing and variable share class investors with 4p in the pound.

“Crestline’s bullying tactics would be rewarded with $84m in September 2019 leaving remaining shareholders with $6m. This on a loan of $17.5m and a distressed share purchase of $7m, [gives them] a whopping 242% return in five years.”

In July, Metcalf told another Isle of Man newspaper, the Manx Independent, that “shareholders find it incomprehensible that the underlying assets that they bought remain intact and offer significant value and yet they stand to potentially lose either a significant part of possibly all of their money”.  

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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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