Orchard hits trouble
SAI Group Capital plans to change the terms of its convertible note investment in Orchard Funds Management next month.
In a letter to note-holders on Friday, SAI director David Hinde said the move was due to the Orchard board deferring any trade sale or float for the fund manager.
“The Orchard board has now deferred any trade sale or other capital raising plan until market sentiment, confidence and evidence of a financial and credit market recovery emerges,” he said in the letter.
“The directors of Orchard and SAI are currently formulating a proposal to restructure the terms of issue of the convertible notes and a proposal will be available about the middle of November.”
The $77 million convertible note issue is due for redemption in March next year and Orchard planned to raise $80 million to repay the note-holders.
Hinde confirmed to Money Management that it had not been successful to date in raising this sum.
The notes were originally issued to help the SAI Group create a diversified funds management business that subsequently became Orchard.
In the letter to note-holders, SAI said a review of the group last year by Gresham Investment Partners recommended Orchard be separated from the parent.
This move was designed to limit Orchard stakeholders and note-holders to the fund manager’s investments in agriculture and venture capital.
These have generated loses although the property funds management business remains profitable.
In May this year, Orchard hired Macquarie Capital Advisers to raise the $80 million and sell down SAI’s remaining 20 per cent stake in Orchard.
“Unfortunately the turmoil in financial and credit markets has resulted in a significant deterioration in the attractiveness and perceived value of fund managers in all asset classes, including property fund managers,” Hinde said in the letter to note-holders.
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