Investors in the mini-bond vendor Blackmore Bond have launched an offer to liquidate the company, investigating its problems as it struggles to raise money during the coronavirus crisis.
A group of bondholders joined to present a High Court liquidation petition against the company, which lost its last quarterly coupon payments.
A bondholder who invested thousands said, “It is very difficult not to know what is going on. If we knew what was going on with our money, we could at least start moving on with our lives. Not knowing is really harmful.”
Blackmore raises funds from the public by issuing so-called mini-bonds. Use the money to build houses, then pay a return on sales profits. His problems began to surface in October last year when he lost a quarterly interest payment.
In an update to bond holders last month, Patrick McCreesh, chief executive officer, told investors that the Covid crisis would put a “further strain” on the company as the real estate market freezes over.
He added that it was difficult to evaluate properties during the block, but that there were still only two evaluations to complete. Its developments include owned homes in Ealing and a converted farm in Longridge.
The bondholders’ lawsuit against Blackmore comes when other company lenders are said to have taken steps to protect themselves while the trustee, Oak Fund Services, raised concerns that security given to some lenders will push Blackmore’s 2,500 bondholders in line .
Meanwhile, KPMG, which was helping Blackmore prepare a bondholder report, is no longer involved in the company and has been replaced by Dow Schofield Watts since March 23rd.
In a letter on Thursday, Oak Fund Services told bondholders that lenders took control of some Blackmore properties in March, including in Liverpool and Birmingham, by naming receivers. He added that Goji Financial Services, who is Isa manager of Blackmore’s Series 4 bonds, was asking for a refund.
The Oak Fund also said that in February and April Blackmore had borrowed money against certain properties and that this “could well affect the bondholders’ security position.” Much of the loan was granted by West One Loan.
Mini-bond sellers are under increasing scrutiny after the collapse of London Capital and Finance earlier last year, which went bankrupt due to around £ 237 million to around 11,600 ordinary investors.
Blackmore declined to comment. Oak Fund Services said, “The trustee is working to protect the bondholders’ interests and will provide a further update for the bondholders shortly.”