The administrators of Tiuta plc have begun to place the bridging lender into liquidation.
Creditors have passed the resolution to put Tiuta into liquidation and the lender will be liquidated once Companies House has been notified.The firm was placed into administration in September last year, although the administration order expires on 27 September 2013.
Tiuta funded its lending with a £106m funding line from the £118m Income Series 1 fund provided by Connaught Asset Management, which is currently in administration after huge shortfalls were discovered in several of its funds, two of which provided funding lines to Tiuta subsidiaries.
When the funding line was agreed, in April 2008, a guarantee was agreed whereby Tiuta promised to guarantee all obligations to the fund, regardless of whether its loans were redeemed fully or not. The Tiuta subsidiary which used the Series 1 funding line was called Tiuta International Limited, which was later purchased by CAM.
A statement published by Tiuta’s administrators on Companies House this week shows the fund has lodged a £106m claim against the lender, citing the guarantee.
In the statement it says Tiuta’s joint administrators, David Rubin & Partners and Duff & Phelps, have sought legal advice and have found the guarantee is enforceable.
However, a source at David Rubin & Partners who is working on the administration said, as an unsecured creditor, the fund will only be paid if any Tiuta assets are realised in the liquidation process.
The last available accounts for Tiuta show the lender made a £37.8m loss in the 18 months to September 2011.
Duff & Phelps will handle the liquidation process.
Tiuta entered administration on 21 September 2012, 10 days after the former regulator, the FSA, confirmed it had approved the decision.
The directors of CAM placed the company into administration the same day as Tiuta. Two Tiuta subsidiaries, Tiuta International and Tiuta Development Finance, used The Connaught Series 1 and Series 2 Ucis funds to fund their lending.
The Series 1 fund was suspended in March 2012, after a shortfall was discovered, and interest payments were not made to investors. Soon after a review was commissioned to determine the fund’s true value.
In August last year, Money Marketing revealed Series 1 investors faced losses of up to 50 per cent. An independent review by Duff and Phelps suggested recoveries would be between £46.5 and £53.2m of the £106m used to fund Tiuta.
A decision to wind down the Series 1 and £18m Series 2 fund, which was used to fund another Tiuta subsidiary called Tiuta Development Finance, was made in June 2012. A Series 3 fund, which was not linked to Tiuta loans and raised around £22m, was wound down in July 2012 due to a spike in redemptions.
CAM bought Tiuta International and Tiuta Development Finance, the Tiuta Plc subsidiaries that used the Series 1 and Series 2 funds respectively, for a £1 in June so it could manage the redemption of loans and the wind down of the funds. In July, Mortgage Strategy revealed Tiuta International had been placed into administration by CAM.