City Pacific will defer the payment of redemptions from the First Mortgage Fund "for up to 180 days" according to a notice posted on the financier's website yesterday.
The freeze on redemptions could also be extended from six months to a year, the
Herald Sun reported.
The firm said the fund would continue to pay interest on investments through this period. The mortgage trust continues to seek new investment from the retail market, and is also searching - so far without success - for an institutional investor.
City Pacific managing director Phil Sullivan told the Financial Review, in connection with the $90 million loan repayment due to Commonwealth Bank by the end of this month, "we are capabale of doing that through the normal cash flow of the business."
Arguably the cash flow position at City Pacific is abnormal, though the short-term strategy is clear enough: freeze withdrawals for retail investors, seek new investment from the retail market and pay down the CBA loan as a priority from the new retail investment and loan repayments as they occur.