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Cattles deals another blow to investors
SUB-prime lender Cattles dashed any remaining hopes for staff and shareholders as it conceded defeat in its attempt to find a viable future for its core Welcome Finance business.
The Batley-based company, which lent to people who struggle to access credit from high street banks, said it cannot resume lending and instead will wind down its outstanding loan book, which was last valued at about 2.5bn.
Cattles' 3,000 staff face a bleak future as the group warned its cost base will shrink as the loan book decreases over the two-to-three year wind down.
Cattles has been brought to its knees by huge impairment provisions on bad debts which had not been properly accounted for.
"We were unable to recommend a business plan to our financial creditors which would allow Welcome to lend to existing or new customers," said executive chairman Margaret Young.
At a heated shareholder meeting in London called to explain the group's "serious loss of capital" Ms Young admitted the company's accountancy problems have been traced back as far as 2002 and possibly earlier.
Shareholders were also told to expect "little or no value" for stock. The shares are currently suspended at 6.88p.
Cattles is in the hands of its banks, bondholders and noteholders, which it owes around 2.7bn. It is close to agreeing a standstill agreement, with a bondholder meeting to be held today to approve it. It hopes this will allow it to financially restructure and repay creditors.
"Our liabilities significantly outweigh our assets," said Ms Young. "Shareholders should be aware that in the present circumstances the directors' duties are primarily to creditors."
Ms Young, who resisted calls from shareholders to resign, said the board had explored all options before deciding to wind down its loan book, but "in the end we had no choice".
When asked by a shareholder if she envisaged a point where the company could ever pick itself up and return to profitability, she replied: "The honest answer to that is no."
One shareholder, retired civil servant Peter Gent, said he and his family have lost 80,000 from Cattles' demise. "I mistakenly advised members of my family to invest in (Cattles)," he said. "These are hard-earned savings not some fancy one-off bonus. This is extremely serious.
"One of the members of my family is continuing (to work) long after retirement because of the Royal Bank of Scotlands and Cattles of this world."
PricewaterhouseCoopers recently stepped down as the Cattles' auditor and is being investigated by accountancy watchdog the Accountancy and Actuarial Disciplinary Board. Grant Thornton has been appointed as replacement, and Ms Young said an external law firm is investigating action against its former advisers.
City watchdog the Financial Services Authority is also understood to be investigating the company.
Ms Young also revealed further details about the extent of the group's financial mismanagement under its previous executive team. Six senior executives have been sacked and former chief executive David Postings stood down.
She said existing and former staff had come forward with documents dating back as far as 2002, which they kept "for their own preservation", revealing repeated manipulation of the loan book to avoid incurring impairment charges for bad debts. "There's some suggestion that maybe it had gone back before that," she added.
Looking at legal action
Cattles shareholders are considering taking legal action against the group's former directors and its auditors.
Retail shareholders and a large City institutional investor have been in touch with London law firm Edwin Coe to ask it to consider taking action for misleading them to investing in a successful 200m rights issue last year.
David Greene, head of litigation at Edwin Coe, said about 170 shareholders have contacted the firm.
"I don't think there's any question that the information given to the market – particularly if they bought into the rights issue – was wrong, and had the truth been out there the rights issue would never have gone ahead," he said.
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Wednesday 23 May 2012
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