Talks over bid to take Cattles private collapse

The Batley-based group's creditors now have two options – to resurrect the talks or let the company go bust. Analysts believe talks will recommence as it is in no-one's interests for the company to go into administration.

Yesterday Cattles said it will now work to find a new solution alongside the remaining bondholders and the group's banks.

It is understood that a third of the bondholders decided to ditch the talks.

There are three distinct groups battling it out to recoup their losses from the Cattles debacle.

In pole position are the banks, who have been awarded first call on assets.

In second place are Cattles' other creditors, the bondholders.

In third place are the shareholders who stand to gain nothing as the creditors are owed 2.4bn and the group has loans outstanding of just over 1bn.

Cattles is winding down the loan book in an attempt to get as much cash as it can to repay creditors.

Under the terms of the collapsed talks, shareholders could have been offered just over 5m, no more than 1p a share.

The discussions revolved around the banks offering the bondholders a certain percentage of the money recovered from the loan book despite various court hearings ruling in favour of the banks.

Both stand to gain less if the talks are not resurrected.

"The bondholders should come back," said one analyst. "What else can they do?"

The plan to take the company private would also allow the group to wind down the loan book out of the public eye.

In a statement, the group said: "Cattles believes that it remains in the interests of all parties to reach an agreement."

The deal would have allowed 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.

It would also have freed Cattles from the cost and regulatory burden of maintaining a stock market listing.

Cattles was brought to its knees by a long-running accountancy scandal.

Its shares 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.

In May, 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.

Angry Cattles investors failed in their attempt to force key directors to resign two months ago.

Led by rebel shareholder Barry Dearing, the investors had called for the resignation of executive chairman Margaret Young, as well as non-executive directors David Haxby, Frank Dee and Alan McWalter.

They claimed non-executive directors failed in their duties, let accounting errors go unnoticed and failed to act in shareholders' interests.

Cattles urged shareholders to vote against the special resolutions, insisting they were not in the interest of the company or its stakeholders.

The resolutions were defeated by 60 per cent of investors.

The company said in a statement: "The board very much regrets the serious loss suffered by shareholders and understands their frustration.

"Nevertheless, in these circumstances the board's legal obligation is to give priority to the interests of the company's creditors."

Banks have first call

The Supreme Court has upheld a decision to award Cattles' banks first call on assets owned by the troubled credit lender.

Banks and bondholders had been locked in dispute over what would happen if the Batley-based company went into administration.

Cattles had asked the High Court to rule on the dispute, and its ruling in favour of the banks was upheld by the Court of Appeal in May.

The court ruled in favour of banks based on guarantees given to them by Cattles' subsidiary Welcome Financial Services.

In July, the Supreme Court rejected an application for permission to appeal against the Court of Appeal.

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