Lender is eagerly awaiting regulator before they can launch £ 80million fundraiser
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The non-standard risk lender (NSF) remains on the brink of its own liquidity crisis that threatens its ability to continue in business.
The group is set to launch a £ 80million fundraiser to fund customer repairs and strengthen its balance sheet, but must first resolve ongoing issues with the Financial Conduct Authority (FCA).
But he warned “that there is a possibility that the Group will go bankrupt” if the fundraising fails or takes longer than expected.
While the NSF has a £ 200million securitization facility that has yet to be used, it believes it will not be able to use it as it would breach commitments when it needed the solicit.
The Morley-based lender has been hit hard by a perfect storm of both the pandemic, which has seen its profits plunge, resulting in a pre-tax loss of £ 35.2million last year and an FCA investigation after a visit by the regulator in March last year as part of a multi-firm review “raised a number of concerns” about the procedures and operating processes of the surety lending division, which has since been placed in managed run-off.
The group has already earmarked nearly £ 17million for its reparations program while continuing discussions with the FCA, with an additional £ 1.9million set aside to cover estimated penalty interest.
In its latest half-year results, the company notes that its plans for a substantial capital increase, which is expected to be in the order of £ 80million, remain subject to ongoing independent regulatory review and continued support from Alchemy and other key shareholders.
Jono Gillespie, Group CEO, said: “After a lot of work over the past year and despite the challenges presented by the pandemic and a complex regulatory landscape, we are determined to continue to achieve our original goal. We are making progress in our discussions with the FCA and hope to reach a conclusion soon.
“As soon as we are able to resolve the Group’s outstanding regulatory issues, we will focus on executing a significant capital increase of approximately £ 80million which will both serve to fund the payment for repairs. and to significantly strengthen the Group’s balance sheet, underpinning our return to profitable growth.
In the first half of 2021, the group recorded pre-tax losses of £ 7.5million, a marked improvement over the half-yearly loss of £ 22.4million before the pandemic.
Gillespie said the need for the company founded in 2015 to support people with low incomes or poor credit histories with access to credit is greater than ever.
He said: “Today there are over 10 million people in Britain whose financial situation means they are effectively excluded from regular credit but whose financial needs – whether to repair a car or buy a new washing machine – still have to be satisfied. It is also clear that over the past two years the landscape has changed, leading to the exit of a number of leading companies that have either left the industry altogether or severely reduced their operations, leaving many consumers behind. with even fewer options for accessing regulated credit.
In the first half of the year, the company noted that branch loans increased profits to £ 2.1million but were still below pre-pandemic levels, while profits from the mortgage loans had fallen to £ 969,000 from £ 2.2million in 2020 and £ 3.2million in 2019.