Eight companies linked to the collapsed bridging lender Market Financial Solutions (MFS) have been placed into administration following allegations from creditors of a £1.3 billion shortfall.
A London judge has ordered those companies connected to MFS into administration after an urgent application by creditors Zircon Bridging Ltd and Amber Bridging Ltd, according to a report by Bloomberg.
The creditors claim that a network of companies linked to the lender’s owner sits at the centre of an alleged fraud that contributed to a £1.3 billion funding gap following the firm’s collapse in February.
In court filings, Zircon and Amber argued that the directors and owners listed for the companies are in fact individuals connected to MFS co-founder Paresh Raja.
OBTAINING FUNDS
The eight firms share the same registered address as MFS and use the same accountancy firm, according to the creditors’ submissions. They claim the companies may have been used to obtain funds from the two lenders under false pretences.
Bridging Soup reported yesterday how MFS had listed Magus Chartered as its main accountants in its most recent annual report.
The allegations expand on earlier claims made against the lender following its collapse on 25 February. MFS had reportedly borrowed more than £2 billion from institutional backers including Barclays and Atlas SP Partners, a unit of Apollo Global Management, while positioning itself as one of the UK’s largest providers of short-term bridging finance.
RAISED FUNDING
Amber Bridging and Zircon Bridging are part of the wider group of entities through which MFS raised funding from institutional investors.
According to the court filings cited by Bloomberg, the two companies lent approximately £44 million to a group of property-owning firms.
The loans were said to be secured against high-value London property, including a £16 million apartment and an £8 million townhouse in Knightsbridge.
However, creditors allege that the borrowing companies were controlled by individuals connected to Raja. Some of those individuals are also said to have links to Magus Chartered Accountants, a London-based accountancy firm that has previously worked for MFS.
Magus did not respond to requests from Bloomberg for comment.
Magus did not respond to requests from Bloomberg for comment.
The court filings further claim that the individuals who provided personal guarantees for the loans may not have had the financial resources to support them.
According to the creditors, the guarantors appear to be individuals “of modest means” who would not normally be expected to stand behind loan facilities of that scale.
CONCERNS RAISED
The filings also raise concerns that some of the properties used as security may have been pledged more than once, while in other cases the companies providing collateral may not have been the legal owners of the properties involved.
A representative for Raja told Bloomberg that the companies involved are part of a broader group connected to MFS and its associated lenders.
They said the directors are in the process of placing the companies into administration and are cooperating with the appointed office holders.
