Lifemark rescue talks with CarVal collapse

Lifemark investors could be forced to rely on the Financial Services Compensation Scheme (FSCS) to bail them out as talks between the troubled life settlement vehicle and CarVal Investors collapse.

US hedge fund CarVal has walked away from a £40 million restructuring deal which would have seen 25,000 Lifemark investors repaid over a 14-year-period, according to sources close to the negotiations.

Lifemark has also had to repay a short-term $2.5 million loan from CarVal now negotiations have broken down.

‘It is obvious in my opinion that CarVal will not come in…CarVal are a very large firm and it is not going to put its reputation in question over a $60 million deal,’ said a source, who added that a number of Lifemark investors had felt the CarVal deal was too expensive.

CarVal did not respond to calls.

The options for Lifemark and the prospects for its investors, who put £350 million into the Luxembourg-based vehicle via Keydata, founded by Stewart Ford, have now narrowed.

Lifemark needs to secure funding through a restructuring deal or sell the life settlement policies it holds in order to bridge its severe liquidity problems.

It ran into funding problems because it has to maintain premium payments on its assets despite fewer policies than expected maturing.

Selling the assets would keep Lifemark afloat until the performance of its portfolio improves but this could take years and would erode the capital that could be eventually returned to investors.

Equally detrimental would be a fire sale of assets if Lifemark went into liquidation, which a source close to the company said could leave investors with returns of just 5p or 10p in the pound.

Lifemark could still sign a deal with CarVal or another third party which was willing to invest into the portfolio.

‘The only way to pay for the premiums is to look to a third party funding or sell assets,’ said a source. ‘It is not easy to sell assets in the current environment…It is sad for investors but unfortunately this is what they have invested in.’