Anger at £20m spent on Cattles' overhaul

The Batley-based company, one of Yorkshire's biggest business casualties during the downturn, is being wound down after a long-running accountancy scandal.

It has lined up a scheme of arrangement where a new company, Bovess Ltd, will buy the group's share capital for 5.3m, de-listing it and giving shareholders 1p per share. Shareholders and creditors are due to vote on the restructuring next week, which if successful would see the lender taken private.

However, rebel investors plan to propose new terms at meetings to be held in Nottingham on Monday and Tuesday. They believe the schemes will negate their right, as creditors, to possible future claims against the company, its directors and advisers – something Cattles strongly denies.

Lengthy legal documents to support the restructuring also reveal lawyers and other advisers have netted at least 19.7m from the restructuring of Cattles, dwarfing the settlement offered to shareholders.

Shareholder Barry Dearing, who stands to lose about 50,000 from the company's demise, is rallying investors. He hopes to gain support for his amendments from Cattles' 32,000 shareholders, about 60 per cent of whom are private investors.

"The amount they are spending on this scheme is obscene – nearly four times what the shareholders are being paid off with," said Mr Dearing.

"It's a pittance in comparison to what they have spent on professional fees."

Legal documents also admit Cattles repeatedly gave shareholders false information, including in the prospectus to its rights issue to raise 200m in 2008.

"A number of the public statements made by Cattles (which include Cattles' 2008 rights issue prospectus... and its regular stock exchange announcements) contained inaccurate financial and other information," state the documents.

"It is possible that investors (including current and former holders of the shares, notes and bonds) that invested in the debt and/or equity securities of Cattles may have a claim against Cattles and/or WFSL (Welcome Finance) for loss that they may have suffered."

Cattles was brought to its knees by an accountancy scandal which saw bad debts understated for years. When uncovered they led to an 850m black hole in its accounts.

Cattles has called the restructuring the "best possible outcome" for creditors and shareholders.

The vote on January 31 in Nottingham requires the support of 75 per cent of voting shareholders, and the creditors' vote the next day requires the same level of support.

If voted through, the deal will let Cattles avoid administration and save 2,500 jobs in the short to medium-term.

However, if the schemes fail, Cattles' 'Plan B' will leave shareholders with nothing.

The restructuring plan follows months of legal wrangling between banks and bondholders, which clashed over entitlement to debt.

The Supreme Court eventually ruled in favour of the banks, of which Royal Bank of Scotland is owed the most.

"I'm not going into this just to try to fail it and be bloody-minded," said Mr Dearing. "Putting it into administration loses everybody money. "We want fair treatment for the shareholders as creditors, who have been kept in the dark for too long."

He wants the wording of the creditors' scheme amended to allow shareholders the right to future legal redress.

"The people who subscribed to the rights issue are entitled to compensation," he said. "Their right to compensation must be preserved."

A Cattles spokesman said: "In case there are any misunderstandings we would like to emphasise two fundamental points about the proposed schemes: first, all the schemes, for shareholders and creditors, have to be approved for shareholders to receive their 1p per share. Shareholders cannot pick and choose.

"Second, by approving the creditors schemes, shareholders do not lose their ability to claim as creditors.

"If they can prove a valid claim, they will receive the same treatment in the creditor schemes as the banks and other creditors. The approval of all schemes therefore represents the best outcome for shareholders."

How the saga unfolded

April 2008 – Cattles launches 200m rights issue to fund banking licence application.

December 2008 – Cancels dividend.

January 2009 – Slashes new lending, cuts 1,000 jobs.

January 2009 – Withdraws application for banking licence.

March 2009 – Second profits warning, warns of serious accounting flaws.

April 2009 – Says 850m bad debts black hole discovered.

April 2009 – Shares suspended.

July 2009 – Investigation passed to regulators and seven executives sacked plus chief executive David Postings quits.

July 2009 – Accountancy watchdog the AADB launches probe into Cattles' auditor PricewaterhouseCoopers.

December 2009 – Admits no hope of restarting lending and shares of little or no value.

November 2010 – Launches restructuring plan to de-list.

January/February 2011 – Shareholders and creditors vote on restructuring.