EXCLUSIVE: Shareholders in New Earth Solutions Group are “unlikely” to see their money returned, after the Courts ruled to provisionally liquidate three associated investment Funds.
On 9 June, the High Court of Justice of the Isle of Man appointed joint liquidators at Deloitte LLP to “provisionally” take possession of assets tied up in the Funds – which have been temporarily suspended since 2013.
These are the New Earth Recycling & Renewable Energy Fund, the Eclipse Investment Fund Protected Cell Company, and the Premier Investment Opportunities Fund.
A hearing to decide whether or not the Funds should be placed in liquidation is scheduled for 12 July.
The Isle of Man Financial Services Authority, with consent of the Fund’s directors, filed a claim with the High Court on 8 June seeking a winding-up order following news that the waste business had entered administration (see letsrecycle.com story).
Administrators at the Manchester office of Duff & Phelps announced two days later that New Earth had been successfully sold to Dm Opco Limited, and that operations at its waste sites would continue as normal under the New Earth name (see letsrecycle.com story).
Sarah Sanders and Alex Adam, both of Deloitte LLP, who have been appointed provisional joint liquidators, have today written to shareholders informing them of the current situation.
As provisional liquidator, Deloitte LLP can only ‘preserve the assets’ of the Funds and does not have powers to sell or manage them. If the Court decides to formally liquidate the Funds after 12 July, then a meeting of creditors and investors will be called to consider an appointment.
An investigation into the circumstances which led to the failure of the Funds could follow.
On whether the shareholders will be able to reclaim their investments, Mr Adam writes: “The financial distress of NESFM and NESG and the presence of more senior lenders, does mean that substantial recovery of value from those investments appears unlikely.”
A number of small investors have made complaints to the Financial Ombudsman Service over advice they received over investments in New Earth – with some reimbursed by their financial advisers (see letsrecycle.com story).
Also writing to shareholders of all three Funds today, Michael J Richardson, director of the Funds, said it was considered “unlikely” that the sale of assets to DM Opco would achieve “over and above” the amount of senior lending.
Full details of the sale of the Group to DM Opco Limited, he added, are “unknown”.
Mr Richardson wrote: “This will come as extremely disappointing news to everybody connected with the Fund, including the Directors, who believe they have made every effort to negotiate the best solution for shareholders of the Fund.
“As communicated previously, this included a package in conjunction with the developer of large heat and power plants in Europe that, if concluded, had a possibility to repair shareholder value in full over the course of time. It is therefore regrettable that this deal did not successfully conclude.”