MIS scuppered by ARK demise

THE managed investment scheme market has become an even smaller world with the receivership of ARK Fund, the listed associate of failed private MIS marketer Rewards Group.

ARK’s directors, led by chairman John Kenny, appointed voluntary administrators last week after the collapse of Rewards Group, which had been seeking $45 million as part of a merger deal with its listed peer.

This week, ARK Fund financier National Australia Bank called in the receivers, appointing James Thackray, Peter Anderson and William Harris of McGrath Nicol, the same people the bank has brought in to oversee Rewards Group.

In February, ARK Fund reported it owed NAB $33 million, an amount that breached its loan-to-value-ratio covenant of 66 per cent. Rewards Group had provided a guarantee over part of that debt.

According to its 2009 annual report, ARK Fund’s property assets were more than $56 million, a series of agricultural properties it leased to Rewards Group.

The MIS market has provided rich fodder for the insolvency world during the past year, starting with the failure of major players Timbercorp and Great Southern. In April, they were followed by Forest Enterprises Australia.

The receivers of Forest Enterprises last month said that the business model relied on annual MIS product sales to fund ongoing operations, a strategy that suffered when investors fled the market last year.

There is significant evidence that the 2010 MIS market will be lower than 2009. Investor sentiment remains low and the number of players is vastly reduced due to market withdrawals and company collapses.

Another MIS player, Elders Forestry, has toned down its expectations for MIS sales, which it last year flagged as high as $53 million. It has been forced to offer internal funding for MIS investors after failing to reach an agreement with its associated financier Rural Bank.

It is offering up to $15 million in financing, which suggests its total sales are likely to be around $20 million in the short-selling season to June 30.

Tasmanian forestry player Gunns pulled out of the 2010 MIS market in April.

It is not all bad news, however.

TFS Corporation has won Foreign Investment Review Board approval for a $20 million investment from a US institution. TFS wants to shift its strategy to wholesale and private markets, away from the volatile retail sector.

TFS, chaired by Frank Wilson, will plant and manage a 180-hectare Indian sandalwood plantation for the investor. The company has stated that it expects to exceed 500ha of sales of non-MIS investment products.

Another player, AACL Holdings, successfully listed in April. AACL’s business model is far removed from the most troubled part of the MIS sector with a focus on broadacre farming.