Troubled resort company Harlequin Property SVG is heading for liquidation unless an eleventh-hour solution to the firm’s financial crisis is found.
Creditors are reportedly owed more than £400 million by the company.
The UK Financial Services Compensation Scheme is one of the main creditors after paying more than £100 million to settle claims against IFAs recommending Harlequin as an investment to clients.
Advice firms closed because they could not afford to pay compensation, leaving the FSCS to pick up the tab.
The FSCS pays compensation to a £50,000 limit, which means investors have received around £100 million for the money they lost investing in unregulated Harlequin property investments that allegedly failed to materialise, but are still seeking much more.
Harlequin’s jewel in the crown was the luxury Buccament Bay resort in St Vincent and the Grenadines. The 4.5 star 100-room resort closed weeks ago and staff were laid off when a utility firm cut off supplies after bills went unpaid.
Harlequin director David Ames is also facing fraud charges in St Vincent and The Grenadines and London.
Harlequin argues the firm’s 6,000 investors are ready to accept an equity for cash deal, but has struggled to value the company.
A judge is concerned that the deal will not get off the ground since Ames now faces the fraud charges in London on March 22.
“Harlequin has not presented a valuation of the company’s shares, nor is it clear whether there exists a viable market for those shares,” a report by accountancy firm KPMG stated.
Harlequin SVG entered insolvency in October 2016, which bought the directors six months of breathing space which is fast running out.
The judge alleges Ames has failed to offer a solution based on robust financial data.
Justice Sir St. Clare Roberts says he was “not satisfied that the insolvent Mr Ames has acted or is acting with due diligence.”
“There is still the lack of financial data which is necessary for the proposal. The whole proposal in many aspects is based on opaque projections.”
The judge also feels most investors have already declined a debt for equity swap.
Harlequin says the company believes 95% of investors would have voted for the debt/equity offer.