Banking

Link returns £20m as it warns investors sales likely to stretch well into 2023

The warning comes as part of a letter to investors published today (6 October), with the former authorised corporate director suggesting investors will need to reset any expectations they may have.

“Investors are reminded that the assets that remain to be sold are the less liquid assets of the fund and it is expected that some of these assets may not be sold before mid-2023,” wrote managing director Karl Midl.

Link Group takeover deal collapses on FCA Woodford conditions

This marks the fifth capital distribution of the LF Equity Income fund and the first in almost two years, with around £20m set to be returned to investors. The final amount will be confirmed in November.

The last capital distribution was the result of the sale of a 19-strong portfolio of healthcare companies to Acacia Research Corporation for £220m and Ombu to Hambro Perks for £30m.

Within a year, the total value of Oxford Nanopore, which was included in the healthcare portfolio, had risen so far the single holding exceeded the price paid for the total portfolio.

NAV collapse

When Link last wrote to investors on 14 June 2022, the value of the remaining assets stood at £118.5m, which has since fallen to just £79.9m.

Midl explained this was due to the falling value of Benevolent AI, which has dropped from €8 per share to €3.91 per share, wiping out 26.75% of the remaining value of the fund.

However, the remaining £7.4m drop, representing 6.2% of the fund, goes unexplained.

Link will challenge £306m Woodford redress bill

Rutherford, one of the eight remaining assets, went into liquidation earlier this year, which may dampen further capital distributions. At the time, it saw £24m wiped off the fund’s net asset value and Link chose to revalue its holding to zero to reflect the current uncertainty that any returns at all would be forthcoming.

Alongside Rutherford and Benevolent AI, the fund also holds Atom Bank, Freevolt, Nexeon, Origin, RM2 and Mafic, a US basalt manufacturer that LFS has twice additionally invested in since the wind up began.

Head of investment partnerships at AJ Bell Ryan Hughes said: “Investors will be pleased to see news of a further distribution from the former Woodford Equity Income fund, as Link continues to try and wind up the fund. This £20m payment represents roughly 25% of the remaining balance of the fund and will be the fifth distribution since the process of winding up the fund began around three years ago.

“However, this of course leaves a further £60m of assets in a number of unlisted companies that still need to be sold. With market volatility high and the economic outlook challenging at best, given these companies have not been sold in the past three years, it is unlikely these final positions will be sold quickly, unless Link is prepared to accept a discount to the current valuation.

“Winding up the fund was always likely to be a challenge and it has certainly proven to be the case. With recent news of the FCA looking at fining Link for its failure to manage liquidity effectively, it feels like events are moving forward a little quicker than before. Investors will be glad to see this after such a long, drawn out process, although it seems there are still plenty more twists and turns in this sorry saga.”

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