It was first suspended back in November 2011 after the FSA issued draft guidance on traded life policy investments, branding them "death bonds".
The product’s manager EEA Fund Management subsequently came under further fire after auditors Ernst & Young disagreed with the valuations and the methods used to arrive at them.
Ernst & Young deemed the underlying policies held within the fund to be worth approximately $100m less than the directors.
Options for shareholders
The restructuring proposal needs 75% majority approval from shareholders who use their vote, and asks them to elect to hold continuing shares or run-off shares.
Those who choose continuing shares will continue to hold their existing shares in the same cell of the fund in which they currently hold shares. If cash is generated from the maturity or sale of policies attributable to these continuing cells it will be reinvested in a new Irish-domiciled life settlements fund, or in other instruments which provide exposure to similar policies.
Investors who choose continuing shares will not be able to redeem them for a 23-month lock-up period from when the fund’s new structure becomes effective.
Meanwhile, if a shareholder elects for run-off shares they will exchange existing shares for shares in a newly created corresponding cell of the fund.
These run-off cells will not reinvest cash generated from policies that mature or are sold. Instead EEA Fund Management is proposing that every six months surplus cash will be distributed among shareholders.
Distressed sellers
Investors might be able to split their investments between the two options, subject to minimum holding requirements, EEA said.
Run-off shareholders could sell some or all of their shares, and the board will do its best to find an authorised broker to help with this process. But it warned the market would likely consider them distressed sellers and any price offered would likely be a significant discount to the net asset value.
Simon Shaw, chairman of EEA Fund Management, said: “The board has made clear it believes the restructuring proposal is in the best interests of the shareholders as a whole and is strongly encouraging shareholders to take part in the vote, either in person or by proxy, and to support the restructuring propsosal.”
