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FSCS and bondholders to vote on Lifemark loan deal

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The Financial Services Compensation Scheme and other Lifemark bondholders have been asked to vote on whether a £95m (US$150m) loan facility arranged by Keydata founder Stewart Ford should be accepted.

Lifemark provisional administrator KPMG Luxemburg has called a meeting of bondholders in a notice published on the Luxemburg Stock Exchange last week.

The FSCS is a principal bondholder of Lifemark bonds as it took over investors’ rights when it paid out compensation to Lifemark investors.

Money Marketing revealed in August that Ford had arranged the £95m loan deal in a bid to take Lifemark out of administration and cover the outstanding premiums and servicing costs of Lifemark policies which are currently at risk due to ongoing liquidity issues.

KMPG has asked bondholders to vote on whether the loan facility should be accepted, or whether Lifemark should be put into liquidation.

The notice names the US lender behind the deal as an affiliate of CSG Investments, a subsidiary of Beal Bank. Ford has passed the management of the loan process to a company called Seaport.

Separately, KPMG Luxemburg has also proposed taking a loan of up to US$10m (£6.3m) from the FSCS as a stop-gap measure to cover premium payments until a course of action is decided.

On the proposals to accept the loan arranged by Ford or put Lifemark into compulsory liquidation KPMG Luxemburg says: “Both proposals involve risks. Under either proposal it is highly likely that bondholders will not receive their full principal entitlement and will receive no interest at all.”

The meeting to vote on the proposals will be held on November 10.

Ford has said previously his loan facility would see an eventual 100 per cent return on capital invested, with funds being returned quarterly over five years. This would allow the FSCS to recoup industry money paid in compensation.

A Lifemark FSCS levy cost the industry £326m this year, with advisers paying £93m and fund managers paying £233m.

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Readers' comments (1)

  • This vote, set up by KPMG, has a perturbing element to it. The FSCS, in its shady dealings with KPMG and PwC has broken the law, according to a comment I have read on another site, and I quote: "By allowing privileged information to one interested party while denying it to others, and the information is employed to the clear advantage of that privileged party, then the European Law of 2003 - the Market Abuse Directive - has been broken. In other words, the FSCS is committing insider trading with the collusion of KPMG and PWC."

    If, as I understand it, FSCS has a majority, and the vote must be carried by 75% then surely there is something wrong here. It seems that here we go again, another stitch up. SF's proposed loan is very likely to be swept aside so that the triad of PwC, SFA and KPMG are once more allowed to ignore the real desires of the bondholders.

    Could this just be another way of stifling public, and by the public I mean the bondholders, rights to a fair and just outcome?

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