receivers appointed to media and income fund while Aberdeen High Income becomes insolvent
Aberdeen Asset Management's split-capital trust problems continue, with one of its trusts becoming insolvent and another being put into receivership.
Aberdeen High Income was announced insolvent on 18 July and receivers have appointed by the board of Media and Income.
In a third blow to Aberdeen, the Leveraged Income Trust, managed by the group, has also suspended its shares after declines in asset values. The suspension of the Channel Islands-based trust will continue until Aberdeen has a chance to clarify its financial position.
A statement from the board of High Income said that, following further substantial falls in the share prices of its investments, the trust's liabilities now exceeded its total assets.
Discussions are taking place between the trust and its secured creditors and a further announcement will be made soon.
The decision to appoint receivers to Media and Income came during a week of activity in the splits market that saw one trust breach its banking covenant, the shares on two others suspended and others paying down debt because of falls in the market.
Simon Brewer and Mike Hore, partners from RSM Robson Rhodes, are joint administrative receivers for Media & Income, with the task of realising the best value from its portfolio.
Paul Locke, analyst at HSBC, said the beginning of administration for the Media & Income trust contrasts with two other insolvent splits Framlington Health & Income and BC Income & Growth. Both the trusts have been placed in insolvent liquidation, which could result in the immediate fire-sale of assets.
Elsewhere in the troubled split universe, shares in BFS Investment's Geared Income Investment Trust have been suspended following a request from the company.
The move has been taken because the split's bank debt of around £89m is now worth more than its assets.
Within the split-cap sector as a whole, 66 trusts have either cut or suspended their dividends, just under half the sector of 139 trusts.
Since the table was produced, New Star Enhanced, Murray Extra Return, BFS Asian Assets, Jupiter Financial, Murray Global Return and Edinburgh High Income have also announced cuts in dividends. This means that of the 66 trusts, 43 have cut dividends while 23 have suspended them all together.
Paul Glover, sales and research analyst at Collins Stewart, believes that, going forward, there is a likelihood the Framlington Split Income trust will cut its dividend, while it is very likely Investec European Growth will reduce its dividend payment.
Edinburgh Leveraged Income, which cut dividends this year, announced to the stock market that it had breached its banking covenants. However, the board said its creditor, Bank of Scotland, remains supportive and is working with the board to rectify the situation.
Two of the splits that have reduced their dividend payments, Govett High Income and Exeter Enhanced Income, both plan to make debt repayments.
The board of Govett High Income intends to repay £10m of its loan facility and reduce its outstanding loans to £39m, while Exeter Enhanced Income has repaid 4.29% of its £33.72m RPI-linked loan, at a total cost of £4.3m.