Blue Sky's Alternative Access Fund cuts supply to mothership

Blue Sky's Alternative Access Fund cuts supply to mothership

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.

More here:

Never miss a news update, subscribe here. Follow us on Facebook, LinkedIn, Instagram and Twitter.

Business News Australia

Help us deliver quality journalism to you.
As a free and independent news site providing daily updates
during a period of unprecedented challenges for businesses everywhere
we call on your support

Looking for a credit or charge card that’s built for your business? Try American Express
Partner Content
A good credit card should work for you, not against you, and let you and your business ...
American Express
Advertisement

Related Stories

Going green: Investible backs eight climate tech companies through $30 million fund

Going green: Investible backs eight climate tech companies through $30 million fund

A cohort of eight innovative technology companies contributing to d...

Asahi acquires Byron Bay-founded 'adult' soft drink maker StrangeLove

Asahi acquires Byron Bay-founded 'adult' soft drink maker StrangeLove

The cultural cachet of Byron Bay-founded businesses continues to lu...

Devine abandons Alba to upsize at Burleigh Heads with $400m Burly tower

Devine abandons Alba to upsize at Burleigh Heads with $400m Burly tower

In a sign that the heat has yet to come out of the Gold Coast prope...

Mandatory COVID isolation to end nationally mid-October

Mandatory COVID isolation to end nationally mid-October

National Cabinet has today determined that mandatory isolation peri...