As the FT reported last night, $639m-UK fund Weavering Capital has been put into liquidation following the discovery of a huge ($637m!) – and previously unknown about – derivative position with an offshore company controlled by the fund’s managing director, Magnus Peterson.
Everything is rather unclear at the moment, but it seems the action was taken only after the fund’s COO became aware of the position and alerted Ernst & Young, the auditors. Curious also is the fact that, as the FT reports, the fund had consistent and solid returns of 10-12 per cent for the past five years. Sounds familiar.
The below statement just released from PwC – who have been appointed to liquidate the fund:20/03/2009 09:01
Weavering Macro Fixed Income Fund Limited – in liquidationInsolvency practitioners from PricewaterhouseCoopers have been appointed as liquidators of Weavering Macro Fixed Income Fund Limited (‘the Fund’), a hedge fund specialising in fixed income investments. This follows the announcement by the Fund on 11 March 2009 of its decision to suspend redemptions and an investigation into a large interest rate swap position with a company controlled by a related party.
Matthew Wilde, partner and head of PwC’s Hedge Fund restructuring team, said:
“Over the period since early November 2008, the Fund had received redemption requests exceeding US$223million but could only meet US$90million of these. With a further wave of provisional redemptions of up to US$65million in the pipeline, the directors of the Fund called us in to look at the options.
“The resolution to wind-up the Fund was made after a brief review concluded that its balance sheet value, most recently US$506m, was almost entirely dependent on the value of a series of interest rate swaps, totalling US$637m, which had been struck with a company which was revealed to be a related to the Fund manager and that lacked the value necessary to support the swaps. This left the Fund with no reasonable prospect of paying its debts and no option but to request that liquidators be appointed”.
A voluntary liquidation of a Cayman registered company is a process governed by statute and Cayman law requires that where a company is insolvent, or of doubtful solvency, the liquidation process must be supervised by the Court. The liquidators role includes:
1) Establishing independent control over the company and take control of all assets
2) Opening a full and regular communication process with creditors and shareholders
3) Establishing a stable base from which to maximise realisation from the assets
4) Investigating the circumstances which led to the current financial position of the Company
5) Considering all the options available to maximise return for creditors and investors
Mr Wilde continued:
“It appears likely that there will be a very substantial shortfall to the Fund’s creditors and its remaining shareholder investors may be left with little. It is clear that there is much to be understood about the circumstances of these trades and creditors and shareholders will soon be advised of details of a meeting of creditors to which the liquidators will report their findings”.
ENDS