In a letter to shareholders seen by International Adviser, the $410m Guernsey-based fund redeemed approximately $16m worth of shares for investors holding continuing shares as of 20 October.
The remaining $33m went to run-off shareholders, which make up 60% of the fund, which means 53% of their original stakes have now been redeemed.
However, the typical loss of capital on the redeemed shares is estimated to be between 15% to 40%, depending on when the original investors bought them, said David Trinkwon, coordinator of the EEA Investors Group – an action group working on behalf of investors to get the best deal for secondary shares.
The buyout amounts to just over 15% of the share’s net asset value (NAVs) as of 30 September 2016.
Low price
The price is significantly lower than 33% of April’s (NAV) per share offered by illiquidity brokerage specialists Tullett Prebon Alternative Investments (TPAI).
In May, the company running the secondary sale offer said it had lined up buyers willing to pay run-off investors 26.69% of the original price per share – an offer which Trinkwon described as “dismal”.
Meanwhile, EEA said it was able to make the payments after a ‘significant’ number of underlying policies matured in August and September, adding that it hopes to, projecting a five-year time frame to return the remaining 47% of shares.
In September 2015, EEA paid investors £56.1m after it sold 188 US life insurance policies to an undisclosed buyer for £83.3m.
EEA Fund
Launched in 2005, investors have been stuck in the stricken EEA fund since 2011 when it experienced a rush of redemptions after the Financial Conduct Authority (FCA) warned retail investors not to invest in what it controversially described as “death bonds”.
Suspended in 2011, the fund resumed trading in 2014 after the Guernsey Financial Services Commission approved a restructure that divided shares into continuing shares for those wishing to remain in the fund and run-off shares for those wanting out.
