Keydata: £12.3m of Lifemark bonds in default

Investors holding Keydata defined income plans have been warned that £12.3 million of Lifemark bonds underpinning their investments have defaulted.

The 25,000 Keydata customers who were invested in Lifemark's life settlement-backed bonds, have been aware of problems since November when income payments were disrupted.

Lifemark released a statement on 2 March confirming its liquidity problems and that its bonds had defaulted on income payments. It now plans to stop making income payments to investors in order to conserve cash in order to keep up the payments on its life insurance policy assets.

The directors of Lifemark are working on a restructuring programme designed to bridge its liquidity gap. A loan could provide the liquidity Lifemark needs but the interest repayments could eat into the profits expected by investors.  

The Luxembourg financial regulator put Lifemark under the supervision of accountants KPMG in November. KPMG partner Eric Collard, who has been working on Lifemark, said a restructuring plan would be released in the next few weeks.  

Lifemark proposed to investors on 1 February to convert its bonds into non-interest paying zero coupon bonds and investors will have to approve this and any other restructuring plan before the company can go ahead.

Former electrical engineer Peter Roy Hilton hoped investing into a Keydata defined income plan would generate a monthly income for his retirement.

‘We have the choice of liquidation or running the bonds out to maturity in the hope they will pay out but that is no good for us. We need that money now,’ said the 69-year-old from West Sussex. ‘We have been kept in the dark.’

The problems at Lifemark throw the focus back on the Financial Services Authority which warned last week of its concerns about traded life settlement products but allowed Keydata to launch Lifemark-invested products when under investigation for problems with the marketing of SLS Capital-based products.

Keydata Investment Services went into administration in June and it was discovered in July that £103 million of investors’ money had disappeared.