Blue Sky Alternative Investments has admitted to the market that it breached a condition of its seven-year $47.7 million loan facility with US-based Oaktree Capital Management.
Blue Sky was not able to reach its required minimum recurring earnings in the March quarter, after it warned in February that it was trying to negotiate with the US asset management firm for a change of the terms to avoid a violation.
The discussions are still ongoing, Blue Sky told shareholders, with Oaktree not waiving the breach.
Oaktree had given the Brisbane-based asset manager the loan facility in September last year.
Under the Oaktree facility, Blue Sky was required to to meet minimum cash balance, minimum recurring cash EBITDA, minimum net tangible assets and annual capex, all measured quarterly.
The company has engaged external advisers to review its compliance with the covenants.
In addition, Oaktree managing director Byron Beath has resigned as a director on the Blue Sky board.
Mr Beath joined the board in December, after a shareholder vote at the group’s AGM let Oaktree convert part of its loan into 30 per cent of Blue Sky’s shares. The US firm became a strategic shareholder and elected its managing director to represent it on the board.
Shares in Blue Sky have fallen to 20 cents after the announcement, as of Friday, down from a high of 25 cents earlier on last week. They had once reached $14.99 in November 2017.
“At the time the covenants were agreed, the company was in a transitional state,” Blue Sky said in its statement to shareholders.
“It executed the facility with Oaktree to strengthen its capital and liquidity position following a period of significant disruption, and to facilitate the execution of a revised business strategy.”
Blue Sky had $46.9 million cash on its balance sheet and around $2.8 billion in fee-earning assets under management (FEAUM) as of 31 March, down from its half year result of $3 billion as of 31 December.
The company reported a $25.7 million loss for the half year, which it attributed to its business restructuring costs.
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