Neil Woodford’s former stake in Rutherford Health has been written down to nil by Link Fund Solutions, which has warned investors may not see any money back from the liquidation.
Portfolio Adviser revealed last week investors in Woodford’s collapsed fund were facing a £24m loss after the cancer treatment specialist collapsed into administration.
In a letter to shareholders on Wednesday, Link Fund Solutions confirmed the worst and said the value of the fund’s stake had been slashed to zero by its fair value pricing committee (FVPC), resulting in a 16.8% hit to net asset value.
This was done to reflect “the current uncertainty around the fund recovering any returns from the company’s liquidation,” the authorised corporate director said.
It is highly unlikely shareholders trapped in the fund, now called LF Equity Income, will recoup any losses. In insolvency proceedings in the UK, shareholders are last in line to receive money from the sale of company assets, with priority given to fixed charge holders, senior lenders and the liquidator.
Link’s FVPC had already slashed Rutherford’s valuation by 41.5% from 65p per share to 38p per share earlier this year as prospects for the company looked increasingly bleak.
Rutherford’s cash woes have been well documented, with Woodford committing millions of pounds worth of financing to keep the cash-strapped business afloat, while he was manager on the fund.
Both Link and Schroder UK Public Private, formerly Woodford Patient Capital, had continued pumping money into the business since inheriting Woodford’s stake. Over recent months, they were among several key shareholders to provide bridging finance to keep the company on life support as it explored longer term funding options.
No update on fifth payment for LF Equity Income investors
Link provided no further update on its progress selling the remaining assets in the fund, but said it would write to investors on or around 30 September or when it is in a position to make a fifth capital distribution.
Three years on from the fund’s suspension, the ACD has returned £2.54bn of cash so far but investors have not received a penny in 18 months. It has warned the wind-up could push into 2023.
Total assets are now £118.5m, down from £142.5m at the end of May, with the Rutherford hit offsetting the valuation boost from Benevolent AI listing on the Euronext after merging with Odyssey Acquisition, a European special purpose acquisition company (Spac).
Link is currently facing legal action over its alleged mishandling of Woodford’s former fund, with Leigh Day and Harcus Parker today filing a group litigation order on behalf of 2,500 clients.
It has also come under fire for its handling of the LF Equity Income wind-up, including its decision to sell £224m of biotech holdings to Acacia Research, some of which were quickly sold for huge profits.
According to The Times, it had an opportunity to divest its stake in Rutherford last year. Mahdi Alfardan, chairman of the Gulf International Cancer Centre in Abu Dhabi, reportedly flew to London in September and offered Link 65p per share for its 20.3% stake in Rutherford.