Wind-up call clouds Blue Sky empire

Blue Sky Alternative Access Fund is considering shredding its management contract.

BAF closed yesterday down half a cent, or about 0.7 per cent, at 72c — well below its net tangible assets of about $1.11 a share.

Embattled Brisbane-based investment empire Blue Sky declared war on itself yesterday, 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 on Friday to call off negotiations with Geoff Wilson’s Wilson Asset Manager to take over management of the fund, and Blue Sky’s revelations last week that it has breached covenants in a $50m funding deal with vulture fund Oaktree.

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

18¢ Blue Sky Alternative Investments closed down 0.5¢ q

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”.

However, on Friday Blue Sky said it had stopped talks with WAM because it “has not been able to secure adequate guarantees for existing unitholders in its closed-end funds”.

In response, BAF said its board, headed by veteran Queensland fund manager Michael Cottier, believed WAM’s terms “are commercial and are favourable to BAF shareholders and the unitholders of the underlying funds”.

Yesterday, BAF said Blue Sky’s move forced it to delay a June meeting where shareholders were to be asked if they wanted to move management of the fund to WAM.

“The BAF board remains committed to taking action in the interests of BAF shareholders,” BAF told the ASX.

It said it was “in discussions” with Blue Sky’s funds management subsidiary, BSAAF Management, “and is closely reviewing BSAAF’s compliance with, and performance under” its management services agreement.

“BAF is also carefully considering, and seeking legal advice and information in relation to, a range of possible options, including termination of the MSA, other possible actions under the MSA and an orderly wind-down of BAF and ­return of capital to shareholders.

“BAF continues to expressly reserve its rights.” It said it would continue to “closely monitor the evolving situation” between Blue Sky, Oaktree and WAM.

BAF closed yesterday down half a cent, or about 0.7 per cent, at 72c — well below its net tangible assets of about $1.11 a share.