The administrators of Tiuta plc have begun to place the bridging lender into liquidation.
The firm was placed into administration in September last year.
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 started 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 on Companies House last week 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.
In August last year, Money Marketing revealed Series 1 investors faced losses of up to 50 per cent.
London & Country associate director of communications David Hollingworth says: “It is obviously good to draw a line under this mess. But in these situations it is the creditors that are set to lose out and after a year in administration they are probably not holding out too much hope.”