The Rasmala Trade Finance Fund has entered voluntary liquidation after ending its defence against a winding up petition brought by majority shareholder Dubai Islamic Bank.
The fund, which had a value of US$263mn as of late 2021, placed itself into the hands of liquidators on May 14, according to a Cayman Islands court document made public late last week.
“The Rasmala Trade Finance Fund’s decision to pursue voluntary liquidation represents a constructive resolution that puts independent oversight and stakeholder interests first,” Rasmala Investment Bank, the fund’s manager, says in a statement to GTR.
“This process, which has the backing of the majority participating shareholder, enables the joint voluntary liquidators to focus on maximising assets and optimising distributions to all investors.”
Liquidators at Deloitte have since applied for the liquidation to be supervised by the court, which would give them greater powers to investigate the fund’s affairs and recover assets held overseas.
The fund launched in 2014, focusing on trade finance assets in the UAE, with the bulk in energy, agricultural commodities, metals and mining.
Three years later, Rasmala said the fund’s assets under management had passed US$100mn and it had delivered 32 consecutive months of positive returns. But the fund temporarily froze redemptions in 2020, blaming the Covid-19 pandemic.
Dubai Islamic Bank (DIB) petitioned a court to wind up the fund in September last year, saying it had lost “trust and confidence” in the management of the investment vehicle, in which it has a 63.7% stake. The bank said its customers had invested some US$315mn in the fund’s trade finance assets in 2017 and 2018.
DIB said in the petition that it had “serious concerns as to the solvency” of the fund, which suffered net losses of US$34.2mn in 2021 and US$66.4mn in 2020, according to audited accounts cited in the petition.
The bank complained of not receiving “basic information” about the fund or how its value was being calculated, and said the fund had not filed audited accounts since 2021. It also objected to fund management fees charged by Rasmala Investment Bank.
The fund filed audited accounts for 2022 and 2023 in February this year after securing the services of a new auditor, the court document says.
According to the May 20 filing by the voluntary liquidators, DIB said the late submission of the accounts and the resignation of previous auditors KPMG were not “adequately explained” and that the fund “suffered huge losses on transactions it entered into”.
The fund told GTR last year it intended to “vigorously” defend against DIB’s petition and subsequently filed evidence in response to the UAE bank’s claims.
But earlier this month, according to the latest filing, the fund contacted the bank’s lawyers to say it was considering placing itself in liquidation and would not oppose court supervision of the process.
The fund is separately facing a claim brought by Saudi asset manager Alawwal Capital, which alleges Rasmala made misrepresentations about the fund’s performance during talks over a US$10mn investment made by Alawwal. Rasmala has denied the allegations, saying it made all the necessary disclosures.
A court in Dubai heard the case in March but is yet to hand down judgment.
During the trial, the court was told the Rasmala fund was owed around US$44mn in overdue payments from borrowers as of September 2018, including interest and principal repayments of just under US$20mn from UAE-based Farlin Energy & Commodities.
The fund has taken legal action in the UK and India against a handful of borrowers over their failure to repay loans. Its claim against commodity trader Trafigura, over transactions the fund financed for Farlin, was heard at a London trial in April this year and is awaiting judgment.
DIB did not respond to a request for comment.
