Non-Standard Finance tanks on recapitalisation plans
Non-Standard Finance said on Friday that it was launching a scheme of arrangement, which if successful will pave the way for a £95m public equity raise that would likely wipe out the equity of existing shareholders.
Under the scheme, £14m will be made available for payment to customers with valid redress claims and for case fees owed to the Financial Ombudsman Service.
NSF said the scheme is a key component of the proposed recapitalisation, which will ensure the future of the group and the Everyday Loans business. It plans to implement the recapitalisation shortly following Court sanction of the scheme.
Shares tumbled as the company conceded that the equity raise would most likely wipe out the interests of its shareholders. At 1255 GMT, they were down14% at 0.35p.
"Although the proposed recapitalisation will ensure the future of the group and the Everyday Loans business, it will materially dilute the interests of NSF's existing equity holders, most likely to negligible value, unless they choose to participate in the equity raise," it said.
The proposed recapitalisation has the support in principle of NSF's largest shareholder and the group's secured lenders, it said. It added that as part of the recapitalisation, it is considering a listing on the London Stock Exchange.
NSF said that of the £95m raised, part of it will be applied towards the cost of the equity raise and part of it will be used to fund the scheme fund and cover the costs of the scheme, while the remainder will be invested in the Everyday Loans business.
Chief executive Jono Gillespie said: "We are very pleased to have reached this important milestone. Whilst this is, in a sense, only the end of the beginning, and significant additional work lies ahead over the coming months, the launch of the scheme is the first key step in reaching certainty as to the extent of our liability for historical redress claims, which should then lead the way towards a successful recapitalisation of the group and secure a successful future of our branch-based lending business."