City Pacific First Mortgage Fund stops redemptions

The City Pacific First Mortgage Fund has become “non-liquid” and will not be meeting the redemption requests of investors, nor will it be listing on the Australian Securities Exchange (ASX) as proposed.

City Pacific managing director and chief executive Phil Sullivan said in a statement to the ASX that repayment delays from the fund’s borrowers had led to problems.

“Due to the increase in delays of repayments by borrowers to the fund, and City Pacific’s expectation that this trend will continue as a result of the current market conditions, it is unlikely that the fund will be in a position to commence the payment of redemptions on 26 February 2009,” the statement said.

The fund will now operate as a non-liquid fund. The proposal to list the fund on the ASX has also been postponed as a result of the volatility and uncertainty in world markets, the group said.

“As a non-liquid fund, all existing redemption requests will be extinguished and the redemption process will operate in accordance with the Corporations Act.”

The statement said the fund would continue to repay its finance facility and meet funding obligations to existing borrowers in the hope that projects can be completed to allow for loans to be repaid. The fund will also continue to make new loans. New funds will be raised through the issue of a new Product Disclosure Statement.

City Pacific said the fund’s unitholders would receive distributions “subject to available funds and dependent on interest received on loans”.