The trustee of defunct mini-bond firm Blackmore Bonds has accused two insurance companies of failing to pay out after the bondholders they insured were left high and dry.
The capital guarantee scheme ensures bondholders are repaid “any shortfall in the event of an insolvency of the company”, the joint administrators at Duff & Phelps said.
The first bond was insured with UK-based company Ion, where Blackmore Bonds raised around £18m ($24m, €20m) and compensation was capped at £75,000 per investor.
The rest were insured with Costa Rica-headquartered Northern Surety Company, as the firm managed to raise approximately £28m through the bonds and compensation to bondholders was set as the value for capital investment.
The trustee of Blackmore Bonds made a formal demand for payment under the capital guarantee scheme to both insurance companies on 19 April 2020.
The joint administrators added: “The trustee has continued to pursue the guarantors for payment, but no payment has been made by either guarantor to date. It appears likely that legal proceedings will be necessary in order to attempt to obtain payment from the guarantors.”
‘Significant shortfalls’
But they added that litigation can take a long time and be very costly, and as a result, the trustee and its legal advisers are looking into alternative litigation funding options.
Without payment from the insurance companies, investors face having very little back from the overall £46m they put into Blackmore Bonds.
Duff & Phelps said that bondholders “are expected to suffer a substantial shortfall in the value of their security”.
As non-preferential unsecured creditors, they are entitled to value their security and “to claim by reducing the value of their claim by any distributions received under the security held by the trustee”, the joint administrators said.
International Adviser contacted both insurance companies, but no comment was provided in time for publication.
