Archive for August, 2009

Cattles Sells Its Subsidiary to Pay Towards Its Bad Debt

Troubled subprime lender Cattles, agreed to sell one of its smaller subsidiaries for £70m to pay towards its total £720m owed in bad debts. The company discovered the bad debt on its books earlier this year and sees the sale as a way to get itself back to financial health.
Cattles Invoice Financing (CIF) was expected to be sold and does show some effort to pay down the bad debt that was discovered to the shock of Cattles’ board. Since debtholders now control the group after the findings that bad debt provisioning policy was not applied properly to the doorstep lending business of Cattles, the company lost seven executives. An assortment of bank covenants have ended up being breached and interest payments owed on bonds have not been paid and as a result, the debt has been trading to levels as low as 20p in the pound.
AnaCap, a private specialist equity house out of London, is buying CIF for a price that will mean Cattles gains £8.4m, only £2m below the net value of CIF, after repaying inter-company loans and transaction fees. Although the deal require a vote from shareholders, given the company’s status as essentially in default due to the halt in its shares being traded, this should be a mere formality.
In actuality, the sale of CIF is only a minor step forward for Cattles and its new executive, Margaret Young. Their doorstep lending unit, Welcome Financial Services, is still subject to a City regulator’s investigation so the main focus for the Cattles’ board is resolving competing claims regarding Welcome’s substantial income from bank lenders and bondholders.
In February of 2009, Welcome ceased lending operations but even as it gradually closes out its loan book, monthly cash income is said to be standing at around £50m and £60m. Cattles has filed a lawsuit against Welcome with the support of its debtholders to get legal clarity over whether the banks lending to Welcome or the bondholders of Cattles plc have first call over the cashflows of Welcome. This battle and the efforts to restructure the company will most likely lead to court involvement until well into the Fall and are not likely to be resolved in 2009.
£2.6bn in loans and outstanding bonds are believed to be held by Cattles, currently.

Troubled subprime lender Cattles, agreed to sell one of its smaller subsidiaries for £70m to pay towards its total £720m owed in bad debts. The company discovered the bad debt on its books earlier this year and sees the sale as a way to get itself back to financial health.

Cattles Invoice Financing (CIF) was expected to be sold and does show some effort to pay down the bad debt that was discovered to the shock of Cattles’ board. Since debtholders now control the group after the findings that bad debt provisioning policy was not applied properly to the doorstep lending business of Cattles, the company lost seven executives. An assortment of bank covenants have ended up being breached and interest payments owed on bonds have not been paid and as a result, the debt has been trading to levels as low as 20p in the pound.

AnaCap, a private specialist equity house out of London, is buying CIF for a price that will mean Cattles gains £8.4m, only £2m below the net value of CIF, after repaying inter-company loans and transaction fees. Although the deal require a vote from shareholders, given the company’s status as essentially in default due to the halt in its shares being traded, this should be a mere formality.

In actuality, the sale of CIF is only a minor step forward for Cattles and its new executive, Margaret Young. Their doorstep lending unit, Welcome Financial Services, is still subject to a City regulator’s investigation so the main focus for the Cattles’ board is resolving competing claims regarding Welcome’s substantial income from bank lenders and bondholders.

In February of 2009, Welcome ceased lending operations but even as it gradually closes out its loan book, monthly cash income is said to be standing at around £50m and £60m. Cattles has filed a lawsuit against Welcome with the support of its debtholders to get legal clarity over whether the banks lending to Welcome or the bondholders of Cattles plc have first call over the cashflows of Welcome. This battle and the efforts to restructure the company will most likely lead to court involvement until well into the Fall and are not likely to be resolved in 2009.

£2.6bn in loans and outstanding bonds are believed to be held by Cattles, currently.

Retail Sales Surge in June

According to official figures, after a pronounced drop of sales in UK shops during May, sales shot up 1.2% in June. This most likely comes because of an increase in summer clothing purchases as the public attempt to deal with the hot weather of this season.
According to the Office for National Statistics (ONS), sales rose 2.9% during June of 2008. In an effort to encourage consumers to spend, shops have pushed their summer sales forward and this has combined nicely with the heatwave to trigger additional purchases.
Although economists had expected a 0.3% rise in retail this June after a drop of 0.9% this May, it appears that sales in retail are in fact quite healthy.
Clothing retailer Next said that the fortunate weather had boosted its sales to an extent that they felt comfortable raising their profit forecast.
Of course, all of this comes thanks to the easy access that consumers have to store cards and other forms of personal credit, so there could be a rise in individual debt following not far behind.
Some analysts believe that this impressive improvement in retail sales figures supports the notion that the worst of this current recession is now over.
It is expected that the Economic growth figures due Friday will show that the overall UK economy shrank by 0.4% from April to June of 2009. Compared to the 2.4% contraction for the same period of time in 2008, this is certainly an improvement. Yet, analysts insist that retail sales are mercurial and that UK households will most likely continue to struggle economically.
According to the ONS, textile, clothing and footwear sales in retail stores rose 11.3% compared to 2008, yet there was a decline in big-ticket household items sales, as well.

According to official figures, after a pronounced drop of sales in UK shops during May, sales shot up 1.2% in June. This most likely comes because of an increase in summer clothing purchases as the public attempt to deal with the hot weather of this season.

According to the Office for National Statistics (ONS), sales rose 2.9% during June of 2008. In an effort to encourage consumers to spend, shops have pushed their summer sales forward and this has combined nicely with the heatwave to trigger additional purchases.

Although economists had expected a 0.3% rise in retail this June after a drop of 0.9% this May, it appears that sales in retail are in fact quite healthy.

Clothing retailer Next said that the fortunate weather had boosted its sales to an extent that they felt comfortable raising their profit forecast.

Of course, all of this comes thanks to the easy access that consumers have to store cards and other forms of personal credit, so there could be a rise in individual debt following not far behind.

Some analysts believe that this impressive improvement in retail sales figures supports the notion that the worst of this current recession is now over.

It is expected that the Economic growth figures due Friday will show that the overall UK economy shrank by 0.4% from April to June of 2009. Compared to the 2.4% contraction for the same period of time in 2008, this is certainly an improvement. Yet, analysts insist that retail sales are mercurial and that UK households will most likely continue to struggle economically.

According to the ONS, textile, clothing and footwear sales in retail stores rose 11.3% compared to 2008, yet there was a decline in big-ticket household items sales, as well.

Debt in the UK stands at Double the Average of Europe

The debt capital of Europe is now, unfortunately, Britain. UK citizens are borrowing an average of nearly twice what those in other western European countries borrow.
Credit cards and other unsecured UK debts stood at £216bn in 2005 alone. That is over a third of the total borrowing in Europe for all forms of debt except mortgages. This means that, according to the Datamonitor research firm, the average resident of the UK owes £3,175 and the total personal debt of the UK stands at £1.2 trillion, including mortgages.
According to this report on the market in 16 European nations for borrowing through hire purchases, credit cards, personal loans and overdrafts, the UK has quite the gluttonous appetite when it comes to credit. Compared to the UK average of £3,175 the average European owed unsecured debts of only £1,558.
These numbers are due mostly to the skyrocketing levels of borrowing that have been reached over the last ten years in the UK. Most of this new debt has been created with the aid of credit cards. Compared to most European countries, the British are far more comfortable taking on credit card debt.
Outstanding credit card balances have risesn by over 380% since 1994 according to figures from the Bank of England. While credit card debt may not be difficult for many people to repay, for those facing large debts it can be incredibly difficult to deal with. This is why so many people are turning to Individual Voluntary Arrangements (IVA), debt management plans and even bankruptcy in more severe cases.
The French trailed closely behind the UK in terms of new lending last year while the Germans came in second in terms of the amount of debt currently outstanding. Even though the lending market is overshadowed by the largest economies, smaller economies like those in Greece and Turkey saw the fastest rising levels of borrowing that didn’t include mortgages. Although it went through a 2001 economic crisis, Turkey saw new lending shoot up by 52% between that year and 2005. Greece, during this same time period, saw its debt from unsecured borrowing increase by 29%. Both countries have the fastest levels of outstanding consumer debts out of all 16 countries.
In the case of Turkey, there is barely a mortgage market and that means most borrowing is in the form of credit cards or other unsecured debts. In Holland, the situation is very different and there only 5% of all debt is unsecured because people typically expand their mortgages in order to buy things.

The debt capital of Europe is now, unfortunately, Britain. UK citizens are borrowing an average of nearly twice what those in other western European countries borrow.

Credit cards and other unsecured UK debts stood at £216bn in 2005 alone. That is over a third of the total borrowing in Europe for all forms of debt except mortgages. This means that, according to the Datamonitor research firm, the average resident of the UK owes £3,175 and the total personal debt of the UK stands at £1.2 trillion, including mortgages.

According to this report on the market in 16 European nations for borrowing through hire purchases, credit cards, personal loans and overdrafts, the UK has quite the gluttonous appetite when it comes to credit. Compared to the UK average of £3,175 the average European owed unsecured debts of only £1,558.

These numbers are due mostly to the skyrocketing levels of borrowing that have been reached over the last ten years in the UK. Most of this new debt has been created with the aid of credit cards. Compared to most European countries, the British are far more comfortable taking on credit card debt.

Outstanding credit card balances have risesn by over 380% since 1994 according to figures from the Bank of England. While credit card debt may not be difficult for many people to repay, for those facing large debts it can be incredibly difficult to deal with. This is why so many people are turning to Individual Voluntary Arrangements (IVA), debt management plans and even bankruptcy in more severe cases.

The French trailed closely behind the UK in terms of new lending last year while the Germans came in second in terms of the amount of debt currently outstanding. Even though the lending market is overshadowed by the largest economies, smaller economies like those in Greece and Turkey saw the fastest rising levels of borrowing that didn’t include mortgages. Although it went through a 2001 economic crisis, Turkey saw new lending shoot up by 52% between that year and 2005. Greece, during this same time period, saw its debt from unsecured borrowing increase by 29%. Both countries have the fastest levels of outstanding consumer debts out of all 16 countries.

In the case of Turkey, there is barely a mortgage market and that means most borrowing is in the form of credit cards or other unsecured debts. In Holland, the situation is very different and there only 5% of all debt is unsecured because people typically expand their mortgages in order to buy things.

UK Public Warned Loan Sharks May Make a Come Back

As lenders become more cautious about their lending, increasingly larger numbers of UK citizens grow more susceptible to using loan sharks as the recession continues. A report from government think tank New Local Government Network estimated that this caution from standard lenders would lead an additional 35,000 people to turn to illegal money lending operations. They selected Manchester, Gatehead, Lincoln and Stoke as places most likely to be attractive targets for loan sharks.
The group suggested that councils should invest more funds into credit unions. They also stated their research indicates that a minimum of 165,000 UK citizens have already used loan sharks and paid incredibly high rates of interest as a result.
Those struggling with debt would be wise to consider the advantages of an IVA or Debt Management Plan which can help reduce the overall debt and end the viscious spiral of interest-fueled debt growth.

As lenders become more cautious about their lending, increasingly larger numbers of UK citizens grow more susceptible to using loan sharks as the recession continues. A report from government think tank New Local Government Network estimated that this caution from standard lenders would lead an additional 35,000 people to turn to illegal money lending operations. They selected Manchester, Gatehead, Lincoln and Stoke as places most likely to be attractive targets for loan sharks.

The group suggested that councils should invest more funds into credit unions. They also stated their research indicates that a minimum of 165,000 UK citizens have already used loan sharks and paid incredibly high rates of interest as a result.

Those struggling with debt would be wise to consider the advantages of an IVA or Debt Management Plan which can help reduce the overall debt and end the viscious spiral of interest-fueled debt growth.

Banks in the UK Now Being Closely Scrutinized

This week the four largest banks in the UK will release the results for the first six months of this year and when they do, bad loans and lending levels will come under close examination. While experts believe that a resurge in financial markets should have fueled better performance, there is an expectation that losses on business loans and mortgages may have risen. The banks will be expected to show that they have increased lending to help consumers during this recession.
While Lloyds and Royal Bank of Scotland will most likely continue to struggle, HSBC and Barclays are expected to show the best results. All of the banks know that they need to be seen as keeping to a commitment to increasing lending to businesses. This may be due, in part, to the fact that Chancellor Alistair Darling recently encouraged banks to begin taking on a role in promoting economic recovery. Darling also publicly worried that smaller businesses were being charged interest rates that seemed unreasonably high and could lead to excessive debt for these firms.
The alleged economic recovery has helped the investment banking arm of Barclays and it is expected that the bank will report nearly £4bn in pre-tax profit. Due to what analysts say are a number of accounting technicalities and one-off gains, HSBC is expected to report £3bn in profits. Neither HSBC nor Barclays accepted the government bail-outs. Both banks are actually outperforming the expectations of some, with Barclays still able to keep its investment bankers paid a cool £250,000 for half a year’s worth of work, according to reports from the Sunday Times. This level of payout has drawn criticism for US firm Goldman Sachs when they gave similar bonus payouts shortly after government bailouts.
Lloyds Banking Group, which took over HBOS in the midst of 2008’s financial crisis is expected to report nearly £5bn in losses later this week. Meanwhile, RBS is expected to report that they have come close to breaking even with profits of £1.2bn despite the fact that in 2008 they reported the largest corporate losses in UK history at £24bn.
As the recession continues to cause homeowners and bussinesses to struggle, as well as triggering job losses, it is expected that the scale of bad loans at the banks will become a major focal point for analysts and the public alike.

This week the four largest banks in the UK will release the results for the first six months of this year and when they do, bad loans and lending levels will come under close examination. While experts believe that a resurge in financial markets should have fueled better performance, there is an expectation that losses on business loans and mortgages may have risen. The banks will be expected to show that they have increased lending to help consumers during this recession.

While Lloyds and Royal Bank of Scotland will most likely continue to struggle, HSBC and Barclays are expected to show the best results. All of the banks know that they need to be seen as keeping to a commitment to increasing lending to businesses. This may be due, in part, to the fact that Chancellor Alistair Darling recently encouraged banks to begin taking on a role in promoting economic recovery. Darling also publicly worried that smaller businesses were being charged interest rates that seemed unreasonably high and could lead to excessive debt for these firms.

The alleged economic recovery has helped the investment banking arm of Barclays and it is expected that the bank will report nearly £4bn in pre-tax profit. Due to what analysts say are a number of accounting technicalities and one-off gains, HSBC is expected to report £3bn in profits. Neither HSBC nor Barclays accepted the government bail-outs. Both banks are actually outperforming the expectations of some, with Barclays still able to keep its investment bankers paid a cool £250,000 for half a year’s worth of work, according to reports from the Sunday Times. This level of payout has drawn criticism for US firm Goldman Sachs when they gave similar bonus payouts shortly after government bailouts.

Lloyds Banking Group, which took over HBOS in the midst of 2008’s financial crisis is expected to report nearly £5bn in losses later this week. Meanwhile, RBS is expected to report that they have come close to breaking even with profits of £1.2bn despite the fact that in 2008 they reported the largest corporate losses in UK history at £24bn.

As the recession continues to cause homeowners and bussinesses to struggle, as well as triggering job losses, it is expected that the scale of bad loans at the banks will become a major focal point for analysts and the public alike. The hope is that people will continue to solve their debt problems by entering into Individual Voluntary Agreements that actually help them eliminate their debt.

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