The board of the suspended EEA Life Settlements fund has contacted shareholders about a proposed restructuring which could be in place by November.
The company said it had called a shareholder meeting to discuss the proposal which would need a 75 per cent majority approval from shareholders who vote. Investors can elect for continuing shares or run-off shares.
The board also warned investors to vote in favour of the restructuring proposal because if it was not approved the board would “seek to appoint a liquidator to wind-up the fund and sell its assets”.
The fund was forced to suspend following the FSA’s consultation publication in November 2011, when a wave of clients tried to withdraw their investments following comments by the FSA, then the regulator, that traded life settlement investments were “toxic”.
EEA hit back at these claims saying the FSA’s guidance on the investments was “contradictory” and irresponsible”.
Under the proposal, shareholders can choose continuing shares which would be held in the same cell of the fund and surplus cash generated from the maturity or sale of policies would be reinvested in a new Irish-domiciled life settlements fund or a similar instrument.
Holders of continuing shares would not be able to redeem them for a 23-month lock-up period from the date of restructure and would only be able to redeem on a quarterly basis having given 95 days’ notice.
Or investors can opt for run-off shares which will see them given shares in a new cell of the fund and cash generated from maturities or sales will be distributed every six months.
Investors may be able to choose to split their investments between the two options, subject to certain minimum holding requirements.
The company said it would try to engage a broker to help those shareholders who wished to sell immediately to do so but it warned the market was “likely to consider them as distressed sellers” and that any price offered was likely to be “at a significant discount to the net asset value”.
Simon Shaw, chairman of EEA Fund Management Limited, said: “The board has made clear that it believes that the restructuring proposal is in the best interests of the shareholders as a whole and is strongly encouraging shareholders to take part in the vote, either in person or by proxy, and to support the restructuring proposal.”
Shareholders who wish to vote should return completed proxy and election forms by post to the fund’s administrator to be received by no later than the morning of October 15, as described in each form.
If the restructuring proposal is approved by shareholders, it is anticipated the restructuring will become effective on November 1 subject to regulatory approval.
