Cattles revamp would see investors hit hard

The Batley-based subprime group yesterday said it is in talks with its key creditors over being acquired by a "newly incorporated company", which would mean delisting from the stock exchange.

Cattles, which was brought to its knees by a long-running accountancy scandal, said a potential offer would likely mean shareholders receive no more than 1p per share.

With 526m shares in issue, that would mean a total 5.26m payout to shareholders.

Investors have already been warned their stakes are of "little or no value".

The restructuring would be done under a shareholder scheme of arrangement, which requires the consent of 75 per cent of voting shareholders.

Cattles added the new company would be formed and managed by a corporate service firm, and ultimately owned by a charitable trust.

"Given the existing deficit in shareholders' funds and the significant losses Cattles' creditors will incur, Cattles would not expect any payment to shareholders to exceed 1p per share," said the group.

The deal would allow shareholders – around 80 per cent of whom are retail investors, such as former and current staff – to crystallise losses and write them off against tax.

The deal would also free Cattles from the cost and regulatory burden of maintaining a stock market listing, allowing the group to repay more of the 2.7bn owed to creditors.

Eric Chalker, a retired company director who holds 3,000 shares in the group, said the offer was paltry.

"It looks to be a very poor outcome for a very poor example of company governance," he said.

"I accept that the value of my shares has been lost through the mismanagement of the company.

"But what difference is it going to make? It doesn't do anything for anybody.

"It raises as many questions as it answers."

Mr Chalker, a member of private investor body The UK Shareholders Association, said he favoured winding up the company, a route unsuccessfully attempted by a handful of shareholders at a meeting late last year.

"Liquidation would be more satisfying for shareholders who remain angry at the wholly inadequate way the directors managed this company's affairs." He added many retail shareholders, whose shares are held in nominee accounts, will not get chance to vote on it.

"Many won't understand the paperwork and won't have adequate time to consider it," he said.

"It's a device to pursue the acquisition of a company with minimum shareholder consent."

The company has been in talks with representatives of its banks and bondholders for some time after being forced to close its doors to new customers last year.

Shares in Cattles were suspended in April last year at 6.88p after accounting problems left it saddled with 700m of bad debts.

That also resulted in the dismissal of senior executives and an FSA investigation.

Its core Welcome Finance arm, which lent money to cash-strapped households, is being wound down to recoup money for creditors, the largest of which is Royal Bank of Scotland.

Last month Cattles revealed long-delayed results for 2008 which showed losses were nearly 200m higher than first thought at 745m.

Impairment losses for 2008 totalled 794m.

The group also warned that it will report "significant" losses for 2009.

Ex-directors stand aside

The Yorkshire Post can reveal that two sacked former directors of Cattles will not be pursuing legal action against the company, writes Bernard Ginns.

James Corr, who was group finance director, and Ian Cummine, the former chief operating officer and chairman of Welcome Financial Services, were fired last summer.

In October they issued appeal notices in the employment tribunal against the summary termination of their employment.

However, the pair reached a compromise agreement with Cattles.

A spokesman for Mr Corr and Mr Cummine said: "We can confirm that the claim has been settled but we are unable to comment further as terms of the settlement are confidential."

The Financial Services Authority and accountancy watchdog the AADB are probing the company and its former directors.

Executive chairman Margaret Young has pledged to explore "all possible avenues for potential claims against third parties".

Cattles declined to comment.