Blue Sky reveals it uses undrawn loan facilities to boost assets under management

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  • Data from Blue Sky shows the company includes $763.5 million in undrawn debt as part of fee-earning assets under management.
  • BLA maintains that including undrawn debt in the calculation of gross realizable value is consistent with standard industry practices.
  • Blue Sky shares are down again this morning as the company battles to regain market credibility.

Listed asset manager Blue Sky is facing another challenge to its credibility, stemming from the inclusion of undrawn debt facilities in its fee-earning assets under management (FEAUM).

The information was revealed in yesterday’s market update, where Blue Sky withdrew its profit guidance for the next two financial years. BLA shares were promptly hammered again to close 8.09% lower at $2.50.

Included in the announcement was a set of detailed numbers showing a breakdown of Blue Sky’s FEAUM across private equity, agricultural assets and real estate.

The disclosure was made to provide clarity about the exact nature of Blue Sky’s fee-earning assets under management, as the company battles to regain credibility.

But the data shows that for Blue Sky’s real estate investments, the company has access to $763.5 million of undrawn debt facilities.

However, the undrawn debt still forms part of its fee-earning assets. Here’s an abridged version of the Blue Sky numbers, highlighting the undrawn debt:

Source: Blue Sky Alternative Investments LImited

In a conference call following yesterday’s market update, Blue Sky’s interim managing director Kim Morison defended the inclusion of the undrawn debt, and said the company’s real estate assets are measured on the basis of gross realisable value.

He said the real estate projects are currently under construction, and the company will draw further on the undrawn debt facitlieis as the projects near completion.

The table also showed that Blue Sky’s private equity assets amount to $558.1 million — significantly below the $1 billion figures quoted in June last year by previous CEO Rob Shand.

Yesterday’s disclosure raises doubts about whether Blue Sky’s $4 billion total for FEAUM is calculated in accordance with standard market practices.

When contacted for comment, a representative of Blue Sky referred Business Insider to the company’s original response to Glaucus on April 3.

“In defining fee-earning AUM, Blue Sky has had regard to the common Australian industry definition of AUM (gross realisable value, market value or fair value) adjusted for any funds that are not fee-earning,” Blue Sky said.

“It is common reporting practice for Australian property fund managers to report the gross realisable value (or “fair value” or “market value”) of an asset in a property fund when reporting AUM.”

A short time ago, BLA shares were 1% lower in early trade this morning at $2.47.

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