Blue Sky Alternative Investments in receivership

Embattled investment firm Blue Sky has capped a horror year by falling into receivership.

Blue Sky Alternative Investments has fallen into receivership after breaching its debt covenants, following a horror year which saw its share price smashed.

The embattled Brisbane-based investment empire has appointed KordaMentha’s Mark Korda and Jarrod Villani as receivers and managers, after last week breaching covenants in a $50m funding deal with vulture fund Oaktree.

Pilot Partners’ Bradley Hellen and Nigel Markey will act as voluntary administrators.

Last week, the group had declared war on itself, with its listed fund demanding its manager “immediately cease deployment” of its capital and warning it might wind itself up.

The Blue Sky Alternative Access Fund, or BAF, which has about $220 million in assets under management, said it was also considering whether it should shred its management contract with a subsidiary of the group mothership, Blue Sky Alternative Investments.

BAF’s anger follows Blue Sky’s decision earlier in May to call off negotiations with Geoff Wilson’s Wilson Asset Manager to take over management of the fund, and Blue Sky’s revelations that it has breached the Oaktree covenants.

Joel Cann was appointed Blue Sky’s new CEO earlier this month.

Blue Sky has been under immense pressure since March last year, when its share price was smashed by allegations from short-seller Glaucus Research that it had exaggerated its fee-earning assets under management and gouged its customers through excessive fees.

The fund manager initially put up stiff resistance, demanding the Australian Securities and Investments Commission investigate Glaucus for market manipulation, but was eventually forced to ­capitulate and slash its claimed ­assets under management from about $4 billion to $2.8bn.

As part of its efforts to stave off collapse, Blue Sky in September took a $50m loan from Oaktree, at a sky-high interest rate of 15 per cent, that the vulture fund can convert into up to 30 per cent of the company.

It also entered into talks with Mr Wilson’s outfit to offload BAF after deciding in November that continuing to run it was “not consistent with the company’s strategy to concentrate on managing institutional capital”.