Last week, embattled investment fund Blue Sky (ASX: BLA) announced it was not going to meet the terms of a $50 million loan from US-based Oaktree Capital Management.
A heavy-handed approach has been the response from the company's Alternative Access Fund (ASX: BAF), which has opted to cut supply to its parent while it considers the best course of legal action.
BAF may even terminate Blue Sky's management services agreement (MSA), and it is also assessing options including an "orderly wind-down of BAF and return of capital to shareholders".
"BAF has directed BLA and BSAAF (the current fund manager), in accordance with the Management Services Agreement (MSA), to immediately cease deployment of BAF's capital until further notice and has taken steps to ensure compliance with this direction," says BAF.
BAF is seeking legal advice in relation to potentially terminating the MSA or winding down BAF completely.
"The BAF board remains committed to taking action in the interests of BAF shareholders," says BAF.
Additionally, the fund has cancelled negotiations with Wilson Asset Management (WAMI). Wilson was in talks to take over as the fund manager, and the extraordinary general meeting to discuss this deal has been delayed.
"BAF will continue to closely monitor the evolving situation between BLA, Oaktree and WAMI and will provide an update to BAF shareholders when the board has made a decision in relation to BAF's position under the MSA, and which BAF options to pursue," says BAF.
After warning the market that it might not be able to meet the conditions of a $50 million loan from US-based Oaktree Capital, Blue Sky Alternative Investments (ASX: BLA) confirmed it was in breach of a financial covenant in relation to earnings last week.
The troubled investment group confirmed to shareholders that it did not meet its obligations to Oaktree at the end of 31 March 2019, as it posted a net loss after tax of $25.7 million for 1H19.
Specifically, the Brisbane-based company was in breach of its minimum recurring cash earnings requirement.
Blue Sky says it has been in "constant" discussions with Oaktree and is attempting to form a new agreement.
"These discussions have been constructive to date and remain ongoing, although agreement has not been reached with Oaktree in relation to a variation or restructure at this stage, and Oaktree has not waived the financial covenant breach," says Blue Sky in a statement to the ASX last week.
Under the loan agreement, failing to meet its obligations means that Oaktree has the right to accelerate the loan and call for early repayment of the facility.
After the company posted the significant first-half loss it appointed a new CEO in Joel Cann and its CFO Elizabeth Walker resigned.
Blue Sky was under siege during 2018 following a bout of bad news stemming from a short-selling report by Glaucus detailing a number of alleged holes in the business of Blue Sky.
- Blue Sky fails to meet Oaktree loan conditions
- Former Blue Sky investment director's fund receives backing from Pinnacle
- Doubts linger as Blue Sky issues debt update
- Blue Sky CFO resigns
- Joel Cann takes the reins at Blue Sky
- Blue Sky's restructure continues to hit the bottom line hard
- Blue Sky in the red in H1
- No earnings guidance from Blue Sky with board change underway
- Oaktree saves Blue Sky with $50m investment
- Blue Sky in discussions to receive lifeline from US investment firm
- Rough trot continues for Blue Sky with poor results
- Lenard's back in founder's control after Blue Sky takes flight
- Blue Sky bounces back in June
- Blue Sky darkens on latest $60 million hit and share price freefall
- Blue Sky in trading halt ahead of major review
- Blue Sky confirms KPMG to carry out comprehensive review
- Brisbane's Top 50 Companies 2018 revealed
- Blue Sky turmoil continues with board purge, further share slide
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