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.

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