London Capital & Finance administrators publish progress report

Smith & Williamson, the special administrators for London Capital & Finance (LCF) have posted a progress report covering the six-month period ended July 29, 2020.

The primary focus and main activity in the administration since the last progress report has involved a great deal of investigation work which the administrators believe will result in making significant recoveries for Bondholders. Although the detail of the investigation work has been and remains highly confidential, the administrators say that significant progress has been made pursuant to which they are proposing to give Bondholders and creditors a focused update in the course of the next few weeks.

In addition to the investigation work referred to above, the joint administrators are pursuing other routes for recoveries into the administration, for the benefit of the Bondholders.

Objective 3 (1) (b) of administration is currently being pursued, which is to achieve a better result for the Bondholders/creditors than would have been the case had the Company been wound up (without first being in administration).

A dividend of 2.5% of capital (about £6 million) invested by Bondholders was paid in April 2020 to over 11,000 Bondholders.

Since the last formal report issued in February 2020, the administrators have taken steps to protect LCF’s (and therefore the Bondholders’) interests in other entities which have either been the beneficiaries of LCF monies or identified as a conduit for LCF monies. In this regard, the joint administrators have taken control of entities within the Prime Group which have an interest in the Waterside holiday village in Bodmin, Cornwall and the land sites in the Dominican Republic. (A total of five Prime Group companies were placed into administration in February 2020 and March 2020).

Following the successful removal of GST as the security trustee, LCF, as the principal creditor of GST in respect of the unpaid judgement costs awarded to LCF, petitioned for the compulsory winding-up of GST and Adam Stephens and Finbarr O’Connell were appointed as joint liquidators of GST by the Secretary of State, on July 20, 2020.

Furthermore, LCM, a sister venture owned by Andy Thomson (principal director of LCF), was placed into compulsory liquidation by order of the Court on July 27, 2020, following a petition submitted, on behalf of LCF, by the joint administrators.

It is not anticipated that there will be a sufficient surplus beyond the sums payable to the Bondholders, who are secured creditors, to enable a dividend to either the preferential creditors, or unsecured creditors.

At the outset of the administration, it was expected that as a minimum, 25% of funds invested by Bondholders would eventually be repaid. This percentage is constantly being reviewed and will be updated when it is clear to the administrators that a different percentage is more appropriate, the administrators explain.

The April 2020 dividend is the first tranche to be repaid to Bondholders, leaving at least an estimated further 22.5% to be paid in future dividends, once the Joint Administrators have realised sufficient assets. Each 5% dividend requires net recoveries of about £12 million.

Future realisations are anticipated to arise largely from the sale of investments and also from legal actions to be commenced in the very near future by the joint administrators. This is likely to be a lengthy process, with no significant monies expected to be recovered into the LCF administration estate for at least the next 6 to 12 months.