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PwC says whole Keydata sale not possible

Administrator PricewaterhouseCoopers has said that a sale of Keydata’s business in its entirety will now not be possible.

PwC says it is unable to sell the whole business as a going concern as a result of income processing and taxation concerns over Keydata’s life settlement assets.

The administrator will now be looking to sell the business that provides services in relation to third party products and is in talks with interested parties on this point.

It says: “In the meantime the joint administrators, the FSA, and a group of banks to which KIS provides account management and administrative services, including Credit Suisse, Morgan Stanley and HSBC, are working together to ensure the continued orderly running of KIS’s services until a disposal can be secured.”

PwC is working to trace products invested with SLS Capital S.A. totalling £103m as income on these products have not been paid by SLS since October 2008.

It says no investor has so far suffered an income shortfall as a result of this non-payment as the gap was filled by KIS’s own corporate funds.

It has also identified that early redemptions of these products have been dealt with in an irregular fashion.

It says: “The administrators have been unable to satisfy themselves as to the safe custody of the underlying assets in SLS and, indeed, information received over the weekend suggests that the assets have been liquidated and may have been misappropriated.”

Consequently no income payments or redemptions on these products will be possible and PwC estimate around 5,500 investors are impacted.

Smilarly the administrator is also seeking clarification on the status of the underlying assets which relate to funds invested in Hometrak S.A.

Income for KIS products invested with Lifemark S.A. and Lifemark will continue to be processed to investors as received.

However, due to concerns about possible tax liability PwC will deduct tax at source from all income generated from these products pending clarification of tax issues. However for the time being no early redemptions on these products will be possible.

KIS products backed by blue chip financial institutions where there is £191m invested are unaffected by PwC’s concerns regarding underlying assets or historic processing of redemptions.

PwC has now recommenced the processing of income, maturity and early redemptions payments on these products but income payments will be subject to the tax deductions referred to above.

On third party products PwC says investors whose relationship with KIS was only through the provision of back office services can be assured that their investments are safe and that income payments and other processing on those accounts is now fully operational.

It says: “In respect of some products where a KIS stocks & shares Isa vehicle has been used we are concluding our investigations so we can provide comfort to HMRC that we can pay income gross rather than net of tax. KIS cash Isa products are unaffected by this. Please bear with us whilst we conclude these investigations.”

PwC says the processing of tax deductions will prove an administrative challenge in the short term and it is likely there will be further delays before payments can be made.

PwC joint administrator and partner Dan Schwarzmann says: “We understand how worrying this new information must be for investors but would like to reassure all of them that we very much have their interests at the forefront of our minds as we seek to fully understand all the issues.”

Click here for full information on affected products.

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