Connaught hit as hedge fund cuts stake

Breeden European, which was set up by former US Securities & Exchange Commission chairman Richard C Breeden, had declared a stake of 13 per cent, or 18 million shares, at the start of July. A stock exchange filing yesterday showed Breeden cut this to 6 per cent, or 8 million shares, on August 6, the day Connaught said it would make a loss for the year.

Connaught is in desperate need of cash as Government spending cuts have hurt its core business.

At the beginning of July, Breeden's holding would have been worth about 19.6m, but by the close of play on August 5, Connaught's shares were priced at 29p and the value of the fund's holding had plummeted to just 5.3m.

Breeden European was not available for comment.

The investor had first disclosed a stake of 4 per cent back on April 6 before increasing this in stages.

The stake building had prompted speculation that Breeden European could be seeking to engineer a merger between Connaught and social housing and care-home provider Mears, in which it also owns shares.

Since then, however, Connaught has stunned the market by announcing it is in dire need of funds and will make a loss for the year, almost wiping out the value of its shares.

Newspaper reports said that Parvus Asset Management and Norway's sovereign wealth fund had also exited most of their holdings in the firm.