Shareholders have been trapped in the stricken $410m (£283m, €368m) Guernsey-based fund since 2011, when it was suspended following a rush of redemptions after the UK’s Financial Conduct Authority (FCA) issued a warning.
The fund resumed trading in 2014 after the Guernsey Financial Services Commission (GFSC) approved a restructure that divided shares into continuing shares for those wishing to remain in the fund and run-off shares for those wanting out.
Delayed redemption payments
In the latest update to shareholders, David Trinkwon, founder of the EEA Investors’ Group – an action group working on behalf of investors to get the best deal for secondary shares – has revealed that investors looking to sell their continuing shares – valued at $12m – face a lengthy wait to get their money.
Investors who made their redemption requests, which need to be in by the last working day of each quarter, by 30 June have been told their payments will be delayed as not enough money has been generated from maturing policies since the last redemption payment in April.
"The fund has never earned enough cash from investments to fund the 8-12% NAV growth paid out to redeeming shareholders prior to November 2011."
“Outstanding requests from December ($9m) and March ($10m), plus the new requests for June ($12m) will be automatically carried forward in priority order to the 3 October redemption day and might be further postponed depending on the available cash at that time,” said Trinkwon.
Continuing losses
He issued a scathing review of the fund’s handling, warning shareholders that they can expect 8% loss per year to the capital value of their shares over medium to long term, on top of the 70% plunge in the original price.
“The fund has never earned enough cash from investments to fund the 8-12% NAV growth paid out to redeeming shareholders prior to November 2011 and was probably never capable of doing so.
“The losses have ended up in the devaluation and reduction in capital for the shareholders trapped in the fund since the suspension in 2011, not to mention the loss of expected medium to long term capital growth of at least 8% per annum,” said Trinkwon.
Run-off shares
Meanwhile, investors who have sold run-off shares via illiquidity brokerage specialists Tullett Prebon Alternative Investments (TPAI) – the company running the secondary sale offer – have also experienced delays in getting their money.
“People who sold shares through TPAI in May have been complaining about not receiving their documentation or money yet and are being told that it is being caused by delays within EEA,” said Trinkwon.
In May, TPAI announced it has lined up buyers willing to pay run-off investors 26.69% of the original price per share – an offer which Trinkwon described as “dismal”.
The company is still offering to buy run-off shares at around 33% of April’s net asset value (NAV) per share, added the EEIG group advocate.
The news comes as EEA announced on 2 August that it will be distributing $18.3m to run-off shareholders by the end of the month.
