Bridging lender Tiuta made a pre-tax loss of £37.8m in the 18 months to 30 September 2011 as the firm suffered heavy losses and writedowns on loan books associated with two Connaught Ucis funds.
Tiuta’s loan book was financed in part by Connaught Asset Management’s income series one fund, which raised over £100m from investors and had a requirement that the lender would finance any loan losses.
The firm’s accounts show a deficit of nearly £36m on 30 Sept which has reduced to £13.2m through the capitalisation of shareholder loans that has seen the Savva family take an 88 per cent stake. The directors say the firm will return to profit in the next financial year. It made a pre-tax profit of £957,767 for the year ended 31 March 2010.
In January 2011 BDO conducted a review of the group’s financial position which identified a liquidity shortfall. Former chief executive George Patellis left in late February.
The accounts state loan default levels increased due to the economic climate to become “untenable as the size of the series one borrowing and related loans dwarfed any reserves of the group”.
The series one fund was suspended in March as interest payments could not be made to investors and the series two fund, which raised £18m, was suspended soon after. In June a decision was made to wind the funds down and the loan books were sold to Connaught for £1 each. Investor losses have yet to be established.