Lifemark vote kick-starts liquidation process

The liquidation process has been triggered for Lifemark after bondholders voted in favour of a controlled liquidation of the troubled life settlement vehicle behind Keydata products.

Bondholders for 21 out of 25 of the Lifemark issues have voted to begin the process to liquidate the Luxemburg-based Lifemark portfolio. The proposal was voted through at a bondholder meeting in London on February 13, with 99.79 per cent voting in favour of the deal.

A meeting for bondholders of the remaining Lifemark issues has been adjourned until February 28.

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

If after one month the decision is unchallenged, the CSSF will petition for Lifemark to be wound up.

The Financial Services Compensation Scheme has also provided a loan of the sterling equivalent of $10m to prop up the Lifemark portfolio owing to a lack of liquidity, which was advanced in January.

Lifemark was a life settlement vehicle that backed Keydata products. The collapse of Keydata in June 2009 prompted an interim FSCS levy on the industry of £326m, with advisers paying £93m.

Had liquidation 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 in compensation.

Earlier this month law firm Herbert Smith wrote to advisers who sold Keydata products offering a 50 per cent early settlement discount for firms with claims against them of less than £50,000.

The FSCS 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 also look to pursue a much larger amount from advisers who sold Keydata Lifemark products.

Lifemark provisional administrator KPMG Luxemburg declined to comment. An FSCS spokesman confirmed the $10m loan was in place, but declined to comment further.