A UK investment fund has emerged as Lifemark's best hope for a rescue deal after US hedge fund CarVal walked away from talks, the fund's administrator says.
KPMG's Eric Collard, who is negotiating for investors in the fund, started re-launching Lifemark as an investment opportunity this morning in order to find the $20m needed to permanently save it from liquidation.
He says unless another deal emerges, the fund has just five weeks before it will be forced into liquidation, resulting in a firesale of its assets.
Collard now has just two weeks to find a suitable investor and to carry out due diligence.
A UK special purpose vehicle interested in a deal is the "most concrete" option on the table to replace CarVal, says Collard but he could not name the company for legal reasons.
CarVal is believed to have been spooked into backing out of loaning money to Lifemark by the huge range of valuations on the fund it received this week from Ernst & Young (E&Y).
E&Y was forced to increase its scope of values because the fund's final worth is so unpredictable.
The high loan interest demanded by CarVal - at rates of around 20% - is also being seen as a deal-breaker.
Collard says any replacement rescuer would need to offer a lower rate in order to be considered as a lender to the fund.
Selling off some of the life settlement polices underlying the fund is the next best option to save it from its short term liquidity problems, says Collard.
If it can stave off liquidation, in the long term the fund has a fund value of around $1.3bn, he says.
But it needs around $4m a month, or around $12m to the end of the year, to pay the premiums of the second-hand life policies which form its underlying assets.
The fund has been dogged by short term liquidity problems because payouts into the fund, expected when original policyholders die, have not been maturing on time.
Allegations of fraud also surround the fund's managers.
Lifemark ran bonds backing Keydata plans owned by 23,000 customers who invested £350m.
Has run Cautious Managed fund since 2011
What’s right – not what sells
Richards fires back at committee report
Available on Investcentre platform
Invested from 2006-2011