XTB corporate bond ETF issuer hits the wall

The Australian Corporate Bond Company which developed the ASX-50 based bond ETFs known as XTBs has failed.

The companies behind the XTB ETFs have collapsed.

The two companies behind the XTB range of corporate bond ETFs have collapsed, after an urgent sale process failed to find a buyer.

The Australian Corporate Bond Company and Global Bond Exchange are in liquidation, with Alan Walker and Glenn Livingstone of WLP Restructuring appointed.

The XTB website was live until Tuesday this week but has now been shut down.

The companies in 2015 launched an initial 17 XTBs (exchange-traded bond units), which allowed retail and wholesale investors to gain access to corporate bond investing in a securitised form.

Equity Trustees said in a letter to clients on September 19, sourced by The Australian, that it had suspended redemptions for 28 days across four of the XTB series, and “during the trading halt period certain disclosures including the daily ‘NAV of XTBs on issue’ will be unavailable’’.

Equity Trustees was the responsible entity of the Australian Corporate Bond Trust.

The companies had a number of high profile backers, with GBX’s shareholders including Queenscliff Partners, Challis Partners, Atlas Advisors and Macphillamy Group Investments.

A creditors’ report issued late last month said the companies failed due to inadequate cash flow, limited cash being raised in a preference share offering and withdrawal of financial support from a related entity of one of the directors.

The directors of both ACBC and GBX were Ian Martin - principal of Challis Investment Partners - and Joanna McNiven.

Challis head of trading Mark Crowhurst is also a shareholder in GBX.

Unsecured creditors of ACBC were estimated to be owed $8.8m, with $7.1m of that owed to GBX and $1.7m to Challis.

Former GBX director Richard Murphy was also claiming to be owed $1.3m in outstanding wages.

“Our preliminary view is that the companies may have become insolvent shortly prior to the appointment of the administrators,’’ the creditors’ report says.

“Immediately following our appointment, we undertook an urgent assessment of the companies’ financial position and determined it would be in creditors’ interests to cease trading but determined that running an accelerated sale of business campaign offering the companies’ business and assets for sale, particularly its intellectual property and goodwill, could achieve some value for creditors.

“The responsible entity, Equity Trustees, revoked ACBC’s corporate authorised representative agreement shortly following our appointment which resulted in ACBC no longer being authorised to continue with the management of the XTBs on issue.

“Considering the above, we immediately ceased to trade, terminated all employee contracts and subcontractor arrangements and vacated the companies’ leased offices in the Sydney CBD.’’

No bailout proposals were received for either of the companies and both were wound up at a meeting of creditors earlier this month.

Financial details contained in the September report indicate ACBC made an accumulated loss of $4.35m over the past four financial years, posting a loss in each year, while GBX lost $7.13m over the same period.

Mr Murphy, in a column published in 2016, said XTBs allowed investors to get involved in the bond market more easily.

“The efficiency of the wholesale market has meant that companies have not felt compelled to list bonds on ASX, particularly as there are costs associated with listing,’’ he wrote at the time.

“XTBs (exchange traded bond units) are filling this gap.

“You buy XTBs because they’re capital stable. We just had the ­biggest political and economic event since the GFC with Brexit throwing markets into turmoil and now election uncertainty over the last few days.’’

The management fee at that time was quoted as 0.4 per cent of the bond’s face value per year for fixed-rate bonds and 0.2 per cent for floating rate bonds.

The liquidators have been contacted for further details.

Originally published as XTB corporate bond ETF issuer hits the wall