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Bondholders vote for Lifemark liquidation

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Lifemark bondholders have triggered the liquidation process for the troubled life settlement vehicle behind Keydata, after voting in favour of a controlled liquidation.

Bondholders for 21 out of 25 of the Lifemark issues voted to begin the process to liquidate the Luxemburg-based Lifemark portfolio at a bondholder meeting in London last week. A meeting for bondholders of the remaining Lifemark issues has been adjourned until February 28.

Luxemburg regulator, the Commission de Surveillance du Secteur Financier, notified Lifemark on February 10 it would be withdrawing its licence as an investment vehicle.

The Financial Services Compensation Scheme has confirmed it provided a $10m loan to Lifemark in January through provisional administrator KPMG Luxemburg to prop up the portfolio, which has been suffering from a lack of liquidity.

The collapse of Keydata in June 2009 prompted an interim FSCS levy on the industry of £326m, with advisers paying £93m.

If liquidation had been avoided, the FSCS would have been more likely to recoup a higher amount of the compensation costs it has paid to Keydata investors.

The FSCS is taking legal action against Keydata distributors in a bid to recoup some of the costs it has paid out. It has offered a 50 per cent early settlement discount to firms with claims against them of less than £50,000.

It has so far accepted 5,200 claims and paid out £67m to Keydata investors who invested through another Luxemburg-based life settlement vehicle, SLS. Money Marketing understands the FSCS will look to pursue a much bigger amount from advisers who sold Keydata Lifemark products.

Lifemark provisional administrator KPMG Luxemburg declined to comment.

An FSCS spokesman declined to comment further.

Axxis Financial Planning director Owen Wintersgill says: “Regardless of what is happening with liquidation, the advisers who sold these products without understanding them should bear some responsibility.”

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Readers' comments (1)

  • This article appears to confirm my understanding that investors' losses are down to the failure of LifeMark the provider as opposed to KeyData the intermediary, raising once again the question as to the basis on which the FSCS saw fit to hammer the intermediary sector for that £93m special levy. Can anybody explain this? Or was it yet another excuse for the FSA to rain down on the intermediary sector yet another salvo of financial carpet bombs ~ despite Hector Sants' claim that the FSA has no prejudicial agenda against small IFA's?

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