Hargreaves Lansdown ejects New Star range

Hargreaves Lansdown has become the latest adviser to take New Star’s entire fund range off its buy list.
The influential IFA says uncertainty over the future of the company will hit New Star’s fund managers.
Stephen Lansdown, the group’s chairman, said in a statement that: “New Star is in negotiation with its bankers to seek a refinancing package. This could well result in the banks taking a sizeable equity stake in New Star in return for writing off the debt.”
The group had applied to the Financial Services Authority to suspend trading of its shares but filed its paperwork incorrectly, Lansdown added, resulting in delays and further falls in the share price. At the time of writing, the share price is trading at just 6.29p.
“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 we removed all New Star funds from our Wealth 150 list pending the resolution of the current situation,” says Lansdown.
If the banks decide to walk away from the debt-equity swap, New Star would most likely go into adminstration. There has been reported bid interest from groups including Neptune, Aberdeen and Hendersons. Darius McDermott, the managing director of Chelsea, says New Star is an unlikely takeover target because its value has fallen to less than £20m while its debt stands at about £230m. “We don’t want to cause panic so we not telling clients to sell. We believe there will be a resolution to this situation soon.”
Martin Bamford, a joint managing director of Informed Choice, says his firm avoids imposing blanket bans on groups, but he is no longer actively recommending New Star funds owing to poor performance.
Earlier this week Bestinvest suspended ratings on New Star funds, again highlighting uncertainty over the firm’s future. Adrian Lowcock, a senior investment adviser at Bestinvest, said in a statement that: “While the New Star funds that are rated have not been among our highest conviction recommendations recently, we do not feel it is appropriate to maintain our ratings until the situation becomes clearer.”
He emphasised he is not recommending that clients redeem New Star funds because assets are held in trust and will not be affected by the group’s liabilities. Lowcock suggests offerings from Invesco Perpetual, M&G and Swip in place of New Star vehicles.