Lifemark $60m rescue loan withdrawn

Lifemark, one of the life settlements groups behind Keydata, could be facing liquidation after US hedge fund CarVal pulled a $60m rescue offer.

CarVal entered a six-week exclusivity period with Luxembourg-based Lifemark last month to try and thrash out a deal but this has failed, according to the Life Settlements Wire.

It had already stumped up £3.5m in short-term loans to Lifemark, which ran bonds backing Keydata plans owned by 23,000 customers who invested £350m.

Around $2.5m of this loan has been already been repaid by Lifemark but the offer of $60m for a longer-term funding proposal is now believed to be off the table.

The deal was likely to involve investors recouping around 30% up front followed by a percentage income over ten to 14 years.

However, it was heavily criticised by Keydata and Lifemark founder Stewart Ford as well as others involved in the deal.

These included director of IFA Vintage Financial Geoff Hartnell, who has clients' money in Keydata.

He warned CarVal was "no knight in shining armour", and its first priority would be to take its "considerable" fee before paying out investors. Some estimates suggest this could be as much as a 20% return on investment annually to reflect its risks.

However, Hartnell said it was important not to underestimate the importance of the cash injection, and CarVal's long term offer was better than a liquidation.

Lifemark has been under the management of KPMG since November as it works on a restructuring proposal.

Its bonds ceased trading on the Luxembourg Stock Exchange in February, and Lifemark stopped paying income to investors.

While bondholders have not received income in months, their initial capital has not been lost. Investors were concerned before CarVal stepped in that Lifemark was close to letting policies lapse as they had not matured as anticipated. Lifemark's settlement portfolio has a face value of about £1.3bn.

If no other white knight can be found, investors' main hope may be the FSCS which said it should know by September whether they can receive compensation.

KPMG and CarVal refused to comment to the Life Settlements Wire on the withdrawal of the loan offer.