Split cap fund BGIT breaches covenant

Britain's split capital investment trust industry was dealt a fresh blow yesterday after one of its members, Britannic Global Income Trust, warned it had breached a banking covenant after the slide in equities cut the value of its assets.

News of BGIT's problems sent its shares down 4p to 5.5p and hit prices across the industry as it prepares for a grilling on Thursday from MPs.

The Treasury Select Committee will quiz the sector's biggest fund manager and regulators about the slide in split cap share prices that has slashed the value of the savings of thousands of investors.

The move will put further pressure on trusts, which are already under investigation by the Financial Services Authority over possible mis-selling and collusive practices by some fund managers.

Disgruntled investors, who lost millions of pounds as heavy debts and cross-shareholdings multiplied falls in the equity markets, are also pressing the industry for compensation.

The MPs will question Aberdeen Asset Management, the Association of Investment Trust Companies and the FSA about problems in the split cap funds, which have a number of share classes offering either income or a capital sum at the end of a fixed term.

Problems in the split capital industry centre on a handful of trusts that borrowed heavily and invested in shares of other split funds.