Non-Standard Finance plots £80m equity raise

Shares in Non-Standard Finance fell sharply on Tuesday, after the doorstep lender confirmed plans for an £80m equity capital raise.

NSF announced in February that it needed more capital to avoid breaching its covenants. The lender has been hit hard by the pandemic, with its loan book at the end of 2020 down 27% on 2019.

The "substantial" capital raising, which is expected to be in the region of £80m, is backed by NSF’s largest shareholder, Alchemy Partners. But the firm added that the raise was dependent on clinching an agreement with the Financial Conduct Authority on the proposed redress methodology for certain customers of the group’s guarantor loans division.

Complaints have surged in recent years over guarantor loans, where a family member or friend guarantees a borrower’s loan.

Since the last trading update in February, NSF said it had seen a “steady build” of month-on-month growth in branch-based lending and home credit which, combined with net receivables, meant both businesses were now returning to growth.

It added: "In guarantor loans, net receivables have more than halved since their peak in March 2020 as a result of minimal lending, good collections and the write off of Covid-impaired customer balances in the 2020 financial year."

As at 1030 BST, shares in NSF were down 9% at 4.72p.

Gary Greenwood, analyst at Shore Capital, said: "Note that our forecasts are currently withheld, and we will look to reinstate them in due course, once the full-year results are out of the way and the FCA review into the guarantor loans division has been completed.

"We believe that there will be strong opportunities for growth in the non-standard lending space in the aftermath of the Covid crisis, that a well-capitalised and well-funded lender should be able to capture subject to being able to operate within the constraints of a market that has become much more tightly regulated in recent years."

The group, which is set to publish full-year results on 30 June, expects the fundraise to complete during the third quarter of 2021.