Providence Bonds plc offered unregulated corporate loan notes offering annual interest of up to 8.25% over a term of four years.
The scheme first showed signs of difficulty in June 2016, when payments were made late. In quick succession it emerged that a Providence subsidiary was under investigation in the USA for offering fraudulent and unregistered securities and had been ordered to stop trading. After that the Guernsey-based holding company, Providence Global, was wound up, and Deloitte stepped in as administrator to wind up Providence Bonds plc.
The winding up process was completed a couple of months ago and Providence Bonds plc has now been dissolved.
Providence Bonds’ literature made it clear that investors’ capital was at risk, but simultaneously claimed “We have designed Providence Bonds to address many of the risks associated with Mini Bonds” and that “Bondholders have three levels of protection:
- the collateral inherent in the business of factoring itself;
- there is a full parent guarantee of all liabilities to the Bondholders; and
- there is a debenture over all the assets of Providence Bonds II PLC the Company, in favour of the Security Trustee.”
Deloitte’s final report lays bare how much protection this actually offered investors in Providence Bonds: none whatsoever.
The most crucial parts of the report are: “Having completed our statutory duties, and following a review of the intragroup claims, no further recoveries have been identified for the benefit of the Companies’ Secured Creditor [IPM, the Security Trustee]. …Insufficient realisations were achieved to enable a distribution to be made to the Security Trustee. No distributions have been made to the Preferential Creditor. There have been insufficient realisations to enable a distribution to be paid to the Unsecured Creditors.”
Other than the grand total of £15,109 from Providence Bond plc’s cash in the bank, the money was all gone. This £15,109 was paid to Deloitte – in any company administration, the administrator stands first in the queue. The Security Trustee received nothing. The bondholders therefore lost all their money.
Significance
The 2016 collapse was widely covered in the media; Deloitte’s subsequent picking over the bones has received little press coverage. This is not that surprising as “Investors in scheme that collapsed in 2016 have still lost their money” is not news.
However, there are still plenty of unregulated loan notes around which heavily feature terms like “debenture” “Security Trustee” “multi-layered protection” in their literature. Any investor who invests on the basis of such “protection” should bear Providence Bonds in mind.
Providence Bonds’ investments were even promoted by the military charity Soldiering On in exchange for sponsorship. It is not known how many veterans lost their savings as a result of Soldiering On’s paid promotion of Providence Bonds.
Who were Providence Bonds?
At the time of the last accounts filed before Providence went bust, the directors were Antonio Carlos de Godoy Buzoneli, Paul Everitt, Adam Tattersall and James Vinall. According to the Telegraph Buzoneli was the overall controller of Providence Group.
Further action
While no money has been recovered for investors in Providence itself, the Telegraph reported in January that an investor action group had launched a Financial Ombudsman case against the FCA-regulated company who approved the marketing material for Providence’s minibonds. Whether the Financial Ombudsman has awarded compensation to Providence investors is currently not known.
Addendum 19.03.18: The Investor Action Group has confirmed that complaints against Independent Portfolio Managers are still being considered by the Ombudsman, after an inital decision to reject the complaints on the basis that Providence investors were not customers of Independent Portfolio Managers was overturned.
We have been asked to clarify that there were two Providence Bond companies, Providence Bonds plc and Providence Bonds II plc – both went bust with 100% losses to investors.
