Brisbane based funds management group Blue Sky Alternative Investments Ltd (ASX: BLA) announced it has entered into voluntary administration, and appointed receivers and managers.
What did they do?
Blue Sky is an alternative asset manager and was a former sharemarket darling. The business was founded in 2006 and their first investment was $150,000 from family and friends. The business grew and expanded into managing money in Private Real Estate and ‘Real Assets’ to become Australia’s first diversified alternative asset manager.
In 2012 they listed on the ASX with a market capitalisation of $33 million and the business had fee earning assets under management of $180 million.
The Short Report
Fast forward to 2018 and Blue Sky had a share market capitalization of more than $500 million and fee earning assets under management of $3.9 billion… or so they claimed.
In March 2018 short seller Glaucus issued a ‘research’ report. The report raised suspicions about wildly exaggerated fee assets under management and put into question Blue Sky’s business model.
At the time, Blue Sky shares were trading around $11.50, but investors rightly panicked and the share price plunged. The fallout led to two board purges, the resignations of managing director Robert Shand and chairman John Kain, along with other board members.
In September, a rescue package arrived from US hedge fund and distressed debt giant Oaktree Capital Management. They provided Blue Sky with a lifeline in the form of a $50 million loan.
Blue Sky reported a $25 million loss for the half year ended 31 December 2018.
Today’s ASX Announcement
Blue Sky shares have paused trading but closed on Friday at 18 cents. At one time in November 2017, they reached a high of $14.99.
In today’s release to the ASX, Blue Sky says financier Oaktree have “enforced their rights under the convertible note facility entered into by Blue Sky” following a breach of a financial covenant in the loan facility.
As a result, KordaMentha was appointed as receivers while Bradley Hellen and Nigel Markey of Pilot Partners as the voluntary administrators.
“The appointment follows a period of significant instability and uncertainty for all stakeholders, including further commentary regarding possible class actions, turnover of senior corporate executives and departure of certain limited partners,” The announcement noted.
“There is considerable work to be undertaken in the immediate future. Oaktree, KordaMentha and management are all united and committed to satisfying the business and its clients’ immediate needs.”
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At the time of writing David does not have a financial interest in any of the companies mentioned.
