Lifemark investors and the Financial Services Compensation Scheme (FSCS) will next month get to vote on whether to opt for a controlled liquidation of the troubled porfolio or plump for Keydata founder Stewart Ford's $150m rescue bid.
Bondholders who want to try to save the portfolio in the hope their investments will make a return at maturity, can vote for the loan deal put together by Ford and US investment bank Seaport - the Seaport Proposal.
The largest of the bondholders is the FSCS since it took over the rights of compensated investors.
The other main option is a controlled liquidation. This would see the FSCS pump a $10m loan into the portfolio to ward off any immediate defaults of its secondhand life policy assets and keep some of its value intact, while the fund is wound down.
Bondholders could receive nothing following a judicial liquidation, as certain creditors may rank ahead of them and the proceeds of sale are expected to be significantly worse than in a controlled liquidation.
The FSCS Loan
Judicial liquidation would be run by the liquidator, without any input in decision-making from bondholders.
If investors opt for the Seaport Proposal, they will be unable to revert to the controlled liquidation should the Seaport Proposal prove "unworkable or impractical", according to the notice from provisional administrator of the fund, KPMG.
"This is because the ongoing liquidity issues which affect [Lifemark] would mean that that Life Insurance Policies may lapse for non payment of premia in the intervening period, and this would also lead to increased costs," the notice stated.
"The effect of this may well significantly harm the values obtainable from the policies."
KPMG may withdraw consideration of, and voting on, the Seaport Proposal and the controlled liquidation at the scheduled meetings if it becomes aware of any new information or relevant factors or if it considers a particular course of action is not possible or "viable".
KPMG's provisional administration of Lifemark will end on 10 November 2011 unless extended by the bondholder vote to complete the wind down of the fund.
The investors meeting is a 10am on 10 November at The Barbican Hall, London.
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