Blackmore Bond Administration Update- Insurance Guarantee Invalid?

 The administrators Duff & Phelps have given their update on progress at the end of 2020 which doesn't make very good reading for investors in Blackmore Bond. With costs it looks like investors are set to lose almost all their investments. Despite Blackmore Bond having property assets these were almost all used as security for other loans and have been sold by the lenders with no surplus left for the bondholders.

One glimmer of hope is the Insurance backed policies that were meant to cover investors in the event of default by Blackmore Bond. However these cannot be accessed by the administrators and will need to be enforced by the trustees on behalf of the bondholders. From reading the wording of the report it seems that there may even be a case that every investor has to apply individually for the cover on their investment. With the insurer based in Costa Rica as outlined here long before Blackmore failed this isn't likely to be an easy process.

According to the contract documents every investor was meant to receive a Investor Guarantee Certificate to confirm that their investment was protected. It's not clear that these were issued to all or any bondholders.

From the Blackmore accounts dated 2017 it is also unclear if the premiums have been paid for the policies. These were due at various different rates but with a minimum amount of £50,000 if only £5 million of bonds were sold. The accounts show only £30,000 has been paid out for insurance and bonds were sold for over £20 million. Blackmore had used tricks to avoid posting accounts for later periods and those were long overdue even at the time of their collapse.

If these numbers are correct then it is entirely possible that the insurance policy is invalid if the premiums were not paid. Without access to the more recent accounts it's impossible to know what other money was paid but based on the other activities by Blackmore such as mortgaging out investment property it is possible that the insurance wasn't paid for all bondholders.

The Blackmore Bond prospectus had the following risk warning about the Insurance Guarantee, I wonder which one it is?

1. The Capital Protection Scheme has the following limitations:
• Should Blackmore fail to pay premiums this would result in the policy falling away.
• Should Blackmore fail to make notification to the insurer in a timely manner this may cause the policy to be invalidated.
• The ultimate underwriter may become insolvent at the time of or before a claim meaning that they would not be able to pay out on the policy.