Cru borrowed £3.2m in soft loans from Arch fund cells

The loans could potentially lengthen the process of selling off assets in the cells if the funds are forced to close. £1.3 million was due to be repaid within one year, according to the accounts for the year up to 30 April 2008 but the accounts suggest that £2.1 million can be deferred by Cru until 2012.

The loans are secured against the distribution agreement between Arch and Cru that entitles Cru to a cut of the funds’ annual management charge as their distributor. If Cru defaulted on the loans, Arch would be able to start receiving Cru’s share of the annual management charge. Cru is thought to take 0.9% according to informed sources, which would bring around £3.6 million of annual income, given the fund range’s approximate size of £400 million under management.

It is unclear whether any of the funds from the loan has directly been channelled into non-executive chairman Jon Maguire’s Africa Invest (Malawi), a business founded in Malawi. Citywire revealed last month that Cru made a £2.4 million loan to the firm with no formal agreement to confirm the terms of repayment. So far only £1.5 million has been paid back according to the latest set of accounts, and auditors PricewaterhouseCoopers have said there is ‘insufficient evidence’ that Cru can recover the outstanding £900,000.

Have your say on the Cru loan facility on the New Model Adviser® blog we published today ahead of the investor meeting.