New Star Sterling Bond Income Units

It is well documented that New Star are in negotiation with their bankers to seek a refinancing package. It would appear that this could well result in the banks taking a sizeable equity stake in New Star in return for writing off the debt.

Although this would be bad news for existing New Star shareholders it will have no direct effect on unit holders in New Star funds. Their assets are held by independent trustees and ring fenced from the company itself.

New Star had indicated that they were going to seek a suspension of their shares on the London Stock Exchange while the negotiations with the banks were carried out but apparently this was filed incorrectly. In addition to causing further embarrassment to the company it also resulted in the share price falling further.

This uncertainty is not good for the company and in particular for its fund managers, many of whom are significant shareholders in the company itself. This was the reason why we removed all New Star funds from our Wealth 150 pending the resolution of the current situation.

Unit holders in New Star funds may be concerned. Whereas we can assure them of the security of their investment, the performance of it will depend on the market in which the funds are invested and the ability of the fund manager looking after them. A careful eye will be required to see how the fund managers are reacting to their changing environment. You can rest assured that we will keep our clients informed of our views on this as events unfold. For now all unit holders, whether you have made a lump sum investment into a New Star fund or are paying money in on a regular basis, you should make sure you are happy with the investment, and as stated above watch it very carefully.