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Hadley Chilton, Cork Gully
Hadley Chilton, Cork Gully

50515

Avoiding contention in the restructuring process

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When Odey Asset Management asked investors to support a move of its oldest fund to a rival firm amid sexual misconduct allegations against founder Crispin Odey, the financial world was reminded of the more salacious reasons an asset manager might embark on a restructuring.

The 32-year-old hedge fund, OEI MAC, is set to move along with portfolio manager Freddie Neave, to Landseer Asset Management, which involves a major restructure of the OEI funds.  The controversial motivation behind the restructuring means that those overseeing the potential move must tread especially carefully to reassure investors and other stakeholders that their best interests remain paramount.

Cork Gully, a leading restructuring advisory firm, is not named as consultant in the Odey case, but with 100 years’ experience overseeing changes to funds’ structures, ownership and strategies, it has knowledge of handling of what it calls “both contentious and non-contentious” situations. Head-quartered in London, the firm Cork Gully has recently opened new offices in Luxembourg City and expanded its operations to advise and manage challenged and tail-end investment funds, as either sub-advisors or replacement fund managers.

Hadley Chilton, Partner at Cork Gully, says: “There are plenty of firms that will take the liquidations of companies in Guernsey, Jersey or Luxembourg, but I think we are trying to offer something different where we go in beforehand, even if it’s on an interim basis, just to sort out problems before it reaches the nuclear option [liquidation].” Chilton gives an example of a fund in Luxembourg where disgruntled LPs wanted to replace the GP “which didn’t go awfully well”, and Cork Gully was able to step in and help resolve the “contentious” situation.

“We’ve been following a GP blow up where the LPS have forced the fund manager out and wanted to replace them. It didn’t go awfully well. Some of the [LPs’] lawyers were saying, it would have been good in that situation to have other options to take over the GP role.” He continues “So restructuring can be contentious, but there are cases where we are helping manager to wind a fund down.”

The move to Luxembourg also follows reform by the country’s parliament which adopted an act on business continuity, restructuring and the modernisation of the bankruptcy regime known as the Insolvency Modernisation Act (IMA). The IMA introduces prevention measures with a view to detecting the financial difficulties of a business at an earlier stage and facilitating business preservation and reorganisation.

Chilton says: “The new version of the restructuring law in Luxembourg is designed to help avoid liquidation and that plays well to the work we do. While the big four firms [Deloitte, Ernst & Young, KPMG, and PwC] can do what we do, some of them are conflicted because they either audit the fund or work for its major investors. We’re doing this for conflict free and can support the process effectively.”

Chilton adds “The expansion into Luxembourg presents a valuable opportunity for our firm to showcase our restructuring and asset management capabilities. We now have presence in Luxembourg, London, New York, Jersey, Guernsey and the Cayman Islands.”  

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