Cattles avoids administration as creditors back restructuring

SUB-prime lender Cattles last night secured its future when creditors backed its restructuring plans, allowing the embattled group to continue winding down its loan book and avoid administration.

After two days of lengthy meetings and votes involving shareholders and lenders, creditors yesterday voted in favour of the Batley-based company's restructuring by "requisite majorities".

Cattles needed the approval for its so-called scheme of arrangement to avoid administration. The company, which suspended its shares in 2009 after uncovering a long-running accountancy scandal, will be able to continue winding down its loan book to pay off its banks.

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"I am delighted that the creditors of Cattles, WFSL and Ewbanks have passed all the necessary resolutions," said Cattles executive chairman Margaret Young in a statement.

"The passing of these resolutions allows us to continue to progress the restructuring of the Cattles group with the aim of achieving the best possible outcome for the shareholders and creditors of the Cattles group as a whole."

The deal is expected to be formally sealed at the High Court in London on February 21, after which the restructuring will become effective and the company de-listed.

On Monday, shareholders voted in favour of the scheme of arrangement by 93.1 per cent – representing some 81.7m shares.

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Shareholders will receive a total pay-off worth just 5.3m – representing 1p per share – paving the way for Cattles to be taken private by a newly-formed company, Bovess Ltd.

But only about 88 million shares voted on the de-listing, just 16.7 per cent of the group's total 526 million issued shares. The company's equity was worth almost 1.5bn before the financial crisis.

No figures were given on the level of support at yesterday's creditors' votes. Bondholders, noteholders and banks are together owed about 2.4bn by Cattles and its main subsidiary, Welcome Finance.

Last year, the Supreme Court ruled in favour of Cattles's banks – of which Royal Bank of Scotland is owed 232m and HSBC owed 102m.

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It is understood a party of bondholders – angry at being told they will receive just a fraction of what they are owed because of the banks' superior claim – voted heavily against the restructuring yesterday.

Last year a party of bondholders, representing about a third of the group's bonds, walked away from negotiations.

However, bondholders were unable to prevent Cattles achieving the required 75 per cent majority.

As a result of yesterday's votes, bondholders owed 750m are due to receive a 49m settlement.

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The meeting in Nottingham was also attended by about 25 shareholders. Some private shareholders successfully tabled amendments to the scheme at the meeting, including ensuring former shareholder representation in creditor talks, plus keeping open the right to legal action against former company directors.

Avoiding administration means the company will be able to continue clawing back debt from its customers. If the votes had failed, putting Cattles into administration, the company had warned it was likely to recoup far less money from its 600,000 customers.

It would also have thrown about 2,500 jobs into doubt. Instead, jobs will be shed as the company shrinks.

Cattles, which will continue life as a private company, expects a two-to-three-year wind down, with the restructuring giving a "stable platform" to do so.

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"It's good for employees," said Ms Young when the group announced the scheme of arrangement in November.

"Because we're remaining outside of administration we're staying in control of our own destiny."

Four of Cattles's directors – Ms Young, David Haxby, Frank Dee and Alan McWalter – will resign once the restructuring is completed. Robert East will stay on as managing director, as will Paul Felton-Smith, as finance director.

Cattles, which lent money to householders with poor credit ratings, was brought to its knees when a long-running accountancy scandal was uncovered in 2009.

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An investigation by law firm Freshfields found the group repeatedly under-accounted for bad debts, resulting in an 850m black hole, which was uncovered in April 2009.

Ms Young revealed later that year that the problems have been traced back as far as 2002, and possibly earlier.

The Financial Services Authority has yet to launch proceedings against anyone over the controversy, which has been one of Yorkshire's biggest business failures during the downturn.

Cattles's former auditor PricewaterhouseCoopers is also being investigated by the accountancy watchdog, the Accountancy and Actuarial Discipline Board, although it has not yet released the conclusion of its probe.

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Cattles recently admitted making misleading and false statements prior to its collapse, including in the prospectus to its 200m rights issue in 2008 – which could open it up to legal challenges.

Company history

Cattles traces its roots back to Hull, when Joseph Cattle founded the business as a retailer in 1927. It extended into weekly home collected credit and in 1963 Cattles listed on the London Stock Exchange.

During the 1960s and 1970s the group expanded by acquisition, buying many similar home credit businesses. In the early 1980s its home credit business was rebranded Shopacheck. In 1994 Cattles bought Welcome Financial Services.

In April 2008, Cattles successfully launched a 200m rights issue to fund a banking licence application. But in 2009 it slashed new lending.

Profits warnings followed, and Cattles suspended six executives. In April 2009 it revealed an 850m black hole in its accounts and long-running accounting irregularities.