Bondholders of troubled life settlement fund ARM Asset Backed Securities have launched their own bid to buy out the fund as they seek to avoid it entering liquidation.
Investor group ARM Help, led by investor Bob Sharpe, plans to table a proposal targeting a coupon of 7.5% and a full return of capital at the end of the bonds’ 10 year period.
Bondholders have enlisted the support of Life Settlement Consulting (LSC), whose principal is Iain Stamp, formerly chief executive of Integrity Financial Solutions.
LSC has access to a $100 million (£63 million) credit facility which, said Sharpe, is ‘vital’ to the restructure bid.
Sharpe said ARM had kept investors in the dark about previous bidders and demand it disclose details of all offers received to date.
‘Ultimately bondholders control ARM and ARM Help is insisting the board supply details of the proposals it has received to all bondholders and that this is followed by a bondholder meeting where all the restructure proposals can be voted upon,’ he said.
ARM said it has always kept bondholders up-to-date on whether offers were being made and has established a procedure for acceptance of an offer for the assets and liabilities of ARM.
ARM said the tender process had not yet begun, the bondholders did not have ultimate control of the fund, and the board and its supervisor appointed by the Luxembourg regulator were responsible for organising the tender process.
Around 2,000 UK investors placed money in the ARM fund, including approximately 800 clients of troubled former IFA Rockingham Retirement.
ARM has been caught in regulatory limbo since November 2009, when it was blocked from issuing new bonds for additional investors by the Luxembourg regulator Commission de Surveillance du Secteur Financier (CSSF).
It has been the subject of an ongoing takeover bid by fellow life settlement vehicle Insetco since September 2011. The bid elapsed in November 2011 but Insetco said in January that it was still interested in the fund.
Investors fear the fund will fall into liquidation without a successful bid in the near future. If it fell into liquidation investors are likely to receive a payout of 30p in the pound, according to Sharpe.
In February ARM wrote off $1.7 million of debts to keep the investment afloat. ARM creditors could force the scheme into liquidation by demanding their money back before the board secures a buyout.