Trade-Finance Fund Barak Weighs New Firm to Buy Frozen Holdings
(Bloomberg) -- Barak Fund Management, which has barred clients from taking their cash out of its flagship trade-finance money pool for almost a year, has considered starting a new fund with two other firms to buy some of its frozen assets.
Barak has discussed raising $250 million in partnership with Pella Resources and Tomahawk Group for the new entity, which would be called Metrica Fund Management, according to an investor document seen by Bloomberg. Metrica, focusing on investments in the metals and associated technologies sector in Africa, would be formed by acquiring three existing performing Barak loans that are affiliated with the founders, it said in the document dated November 2020.
Mauritius-based Barak halted withdrawals from its flagship trade-finance fund in April 2020 as markets dried up for many of the loans it had made across the continent of Africa. The firm is currently seeking client approval to restructure the fund by spinning off its illiquid assets into new vehicles. As much as 54% of its assets are deemed illiquid, according to a restructuring proposal sent to Barak’s existing investors in February.
Metrica, conceived by the three firms in 2019 as a potential joint venture, “has not yet launched, has not accepted any subscriptions and is not in a position to invest any capital or to make any commitment to acquire any underlying assets,” Pella, Tomahawk and a Barak representative said in a joint statement.
None of the Barak funds’ assets are currently for sale, the firm said.
“In the event that any fund might decide to dispose of an asset, and the Metrica fund (if it is formed) were to express interest in such investment (as have many others), any transaction between them would effectively create liquidity for non-continuing investors and would, through the independent valuation mechanism, be at arm’s length,” the firms said.
The Metrica document, which lists Barak’s chief investment officer Prieur du Plessis and Adonis Pouroulis, founder and chairman of Pella, as part of its management team, said Barak turned its focus on its core short-term fund activities last year, creating an opportunity for Metrica to acquire some of its longer-dated portfolio assets.
Metrica’s startup plans include buying a Barak loan made to Alufer Mining, a Guinea-based bauxite producer of which Pouroulis is non-executive chairman. It would also acquire similar Barak loans provided to Galane Gold and Alphamin Resources Corp., according to the document. The three loans total $50 million with remaining tenors of up to 2.5 years.
“The Metrica fund concept is not about acquiring specific deals from Barak’s loan book, but about creating a portfolio of new long-term investments. For this reason, a consortium of experienced managers is required,” Barak said in the joint statement.
Barak told clients last month that its flagship fund’s investment objectives were no longer “reasonably achievable,” which made the continued suspension and restructuring necessary.
The firm’s new auditors, who are trying to finish delayed 2019 financial statements for the flagship fund, are also reviewing whistle-blower complaints from some of Barak’s former employees. Two raised concerns about the quality of collateral linked to some loans that it made, while another warned about the overvaluation of some assets.
“No wrongdoing, corruption, fraud or criminal activity or any other matter impacting the financial statements of any of the funds has been identified,” Barak said in a statement last week.
In a new statement on Wednesday, Barak reiterated that the allegations last year were raised by former employees only after a labor restructuring process had commenced, and of which they were part.
“The allegations were patently designed to pressure Barak Fund Management Ltd. into paying higher redundancy packages than were due, or to remove said employees from the redundancy process completely,” the firm said.
Barak’s representative also said that several investors have been contacted in the past few weeks by one of its competitors, which is seeking to take over the management of the assets. The firm says it has also determined that certain former employees are now working for the competitor in question.
“The coincidence of the timing of the sustained media attack on the company and the attempts to usurp the clients of Barak Fund Management Ltd. is noteworthy,” it said.
Barak was founded by Jean Craven and du Plessis in 2008. The firm launched its flagship Structured Trade Finance Fund with $300,000 in 2009. The fund, which grew to manage in excess of $1 billion by 2018, offers working-capital financing and other loans to African companies.
Unlike Barak’s frozen fund, which previously had allowed clients to take out money on a quarterly basis, Metrica is a closed-end money pool locking in investor capital for longer.
“The Metrica fund concept is in no way linked to the plan to lift the suspension of subscriptions and redemptions in the funds or the restructuring of the company,” the Barak representative said in Wednesday’s statement.
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