Although they are keeping information pretty tight, Oxford Capital has run into some issues with its Estate Planning Service (OCEPS). This is their unquoted product that allows investors to get Business Relief from IHT. Their website has the following up:
The website supplies a similar line for the EIS product too, with this described as paused rather than suspended.
Oxford Capital is not being terribly helpful to external analysts. When I called, the only real information they gave me (several times!) was that the anaerobic digestion and reserve power assets have declined in value and investigations are taking place to find out what the effect will be. This much I already knew from speaking with advisors and other market participants. Actually, there’s a lot more floating round in rumours, but until I can substantiate those I’ll keep most of them to myself. But, given the circumstances, the one about a purchaser being sought for the assets looks plausible. The only bit of actual news I got was that the reserve power issues are not related to the recent regulation changes.
I did also speak to one of the lenders. They seem confident of getting their money back, but that will be of little consolation to equity investors. The presence of gearing when things go wrong works against the latter’s interests.
Given its now been several weeks since this happened, we can only wonder at what they are still investigating. It may be they are trying to rectify problems before revealing more, but the lack of information doesn’t encourage anyone. One can only hope that there aren’t any estates out there looking for their money in a hurry.
And the issues may have been going on for months. The 2018 accounts for Brimstone Life, Chalkhill Life and Skipper Life, the three companies OCEPS invested in, have been overdue since 31 December 2018. That doesn’t look good. However, a new corporate Director, UK Officer Ltd, was added on 15 March 2019 so clearly something is happening.
Governance
What I wanted to highlight was something that I wrote late last year about governance. This was an area that struck me as being particularly poor as I investigated the unquoted Business Relief sector. Since then it has actually got worse, as one provider has removed both its independent directors to save costs.
It is interesting to see how OCEPS stacked up on the issues I highlighted:
- Independent directors: each company appears to have one
- Accounts: poor disclosure, with only a balance sheet produced
- Valuation: produced internally and not part of the audit
So while OCEPS isn’t the worst offender out there, it does look pretty poor. Given we don’t know what happened, we can’t know if what went wrong is in any way related to governance. But is it a coincidence that the BR product that has issues is one with weak governance and disclosure?
In my meetings with Oxford Capital (with staff who have now left), I was promised further information to explain the issues that I saw, most notably the inconsistent profitability. It never arrived. Now it never will. These products are sold on safety and the loss of confidence means that this product is screwed. I’d imagine any adviser who has clients in it will be trying to get them out as soon as they can. Liquidation may well beckon.
Interestingly there appears information on the web that as far back as March 2017 the Government was talking about reducing the income on KWH. My parents estate, via Oxford Capital and IFA advice, invested money in the OC infrastructure fund in March 2017. Negligence perhaps?
Any thoughts would be appreciated.
Given the absence of details it is hard to know. Others have had issues in reserve power due to the legislative changes, but there has been more than one change there. From what I hear one of these may be reversed later this year. But Oxford Capital told me that the issue was not related to these changes, which is surprising and somewhat mysterious.
On the other hand, the anaerobic digestion issues, appear to be more in the implementation of projects rather than due to government changes.
Thanks Brian. I am gathering more evidence. I will then decide whether or not to enquire further with OC.
I too have serious concerns about the Oxford capital and the infrasurcture EIS scheme. My inversment was in reserve energy generating plant. In retrospect I can not conceivably see how the businesses Oxford set up with only one non-Oxford director and the internal Oxford management team could work. I have found it almost impossible to obtain accounts and any other information on my investment or indeed a plausible reason for the failure of this massive EIS investment scheme
I really don’t know what has happened with their reserve energy. As alluded to in the article, Oxford Capital has said there are issues, but are saying nothing about what happened. There have been big problems in the market due to the government reserve power scheme being deemed state aid, which meant the regulations were changed. This changed the financial viability and other EIS managers have seen losses as well, but they have at least communicated about them. However, when I asked Oxford Capital about this specifically they said the issues were nothing to do with the regulatory changes. Which only leaves them having messed up in some other, unknown, way.
Run properly and without regulatory changes these may have worked. Without gearing though there may have been more (some?) value left for shareholders. As it stands, Oxford Capital itself looks like a company that would be unviable were it not for illiquid assets, but that doesn’t help shareholders.
My mother passed away very recently, and going through her papers I see she has also lost a considerable amount of money investing in OC infrastructure EIS schemes. I’d be interested to know the outcome of any of the above concerns or enquiries?
The Estate Planning Service was taken over by Downing. Sadly, I’m not aware of anything being worked out for EIS investors. There have been a few EIS, not just OC, that were sold as safer investments, but have proven to be higher risk than anticipated. The fine print generally has something along the lines of unquoted companies being high risk and the investor says they understand it, which leaves them with little comeback.
Brian, thanks for your reply. It’s frustrating, but I thought that was probably the case.