Arch forced Nice Group into administration

Arch pushed one of the holdings in the suspended Arch Cru fund range into administration after it called back loans of £2.6 million it had made to the firm.

According to the administrator's statement, property services company Nice Group went into administration on 6 March after Arch Group called back the loans with 24 hours notice, just days before the Arch Cru fund range was suspended by authorised corporate director Capita.

Two of the Channel Islands-listed cell companies into which the £350 million Arch Cru fund range invested are the main shareholders of the company. Arch Real Estate IC 1 and Arch Real Estate 2 own a combined 70% of Nice Group.

But the prospect of the two cell companies retrieving any assets from the company appears bleak. Administrators Tenon Recovery estimate in their report to creditors that only £243,989 would be raised by a sell-off of the company’s assets. This is dwarfed by the company’s liabilities of £4,421,870.

All of the Arch Cru funds apart from the Private Finance fund have weightings in real estate ranging between 7.7% and 12.4% according to the latest available factsheets. The Arch Real Estate IC 1 and 2 cells are the only of the 23 listed on the Channel Islands stock exchange that have a pure real estate focus.

Included in those liabilities is £2.5 million owed to Arch Financial Products, a related company to Arch Group and the manager of the Arch Cru fund range. The loan is unsecured, meaning Arch itself is also likely to fail to get back any company money it put into Nice Group.

Arch entered into a joint venture with Nice Group, which partnered with institutional fund managers to service their property portfolios, in the summer of 2007, which saw Arch take up 25% in Nice Group shares. Arch then provided loans to the company when it hit cashflow problems in 2008

But Arch began delaying a number of their projects and took others in-house later that year, and ‘increasingly delayed payment and challenged outstanding invoices’ according to Tenon Recovery’s statement of administrator’s proposals..

It agreed on a recapitalisation strategy with Nice Group after the company saw business dry up in the wake of the credit crunch. But Nice Group directors were forced to immediately consult insolvency practitioners when Arch’s loans were suddenly called back.

Arch declined to comment.