Grant Thornton has been appointed receiver of the troubled Axiom Legal Financing Fund, following a hearing which took place in the Cayman Islands on 31 January and 1 February 2013.
This means that City Equities’ application, or any other fund manager’s application to be fund manager, has been rejected by the Judge.
In a letter to shareholders, dated 12 February and seen by FTAdviser, the directors of Axiom wrote that the Honourable Mr. Justice Foster QC have granted an order appointing Michael Saville and Hugh Dickson of Grant Thornton Specialist Services (Cayman) Limited and James Earp of Grant Thornton UK LLP as receivers for the fund in response to the directors’ application to the Grand Court of the Cayman Islands.
Justice Foster also ordered that former fund manager Tangerine Investment Management is to pay 60 per cent of the fund’s costs of the receivership application, with these costs to be taxed on the standard basis, the letter said.
A source close to the situation told FTAdviser: “This is probably the best outcome for investors as it is better than it going into administration. The trouble with City Equities’ proposal, which has been flagged up before, is that there is conflict of interest because of the ownership of the structure.”
Both the independent Axiom directors and the Cayman Islands Monetary Authority have previously stated that they support an ongoing petition for Axiom to be put into receivership, arguing there is a potential conflict of interest in City Equities, which like Tangerine is owned by British Virgin Islands-based Otterswick Ltd, becoming investment manager.
The Axiom director and Cima said they will oppose a bid to take over management of the embattled Axiom Legal Financing Fund City Equities as it is related to Tangerine Investment Management, which was removed from its role in November last year.
Axiom Legal Financing Fund directors previously said they are supporting the proposed appointment of Grant Thornton as receiver in acknowledgment of shareholder preference, despite claiming KPMG, which recently conducted an external audit of the fund’s assets following a number of allegations, would be the more appropriate choice.
In a letter to the Grand Court of the Cayman Islands, dated 24 January and seen by FTAdviser, Cima said it has “no objections” to Grant Thornton being appointed as receivers rather than KPMG.
The directors said in a separate letter on 24 January, also seen by FTAdviser, that City Equities’ plan is not in the best interests of shareholders due to an “inherent conflict” they consider exists with Tangerine Investment Management.
Alongside the fund’s independent directors and Cima, investors which fund distributor Taylor Moore is “loosely representing” have also supported the receivership proposal, suggesting there may be a lack of support for City Equities’ proposal.
