TIDMNSF
RNS Number : 2883T
Non-Standard Finance PLC
17 March 2023
Non-Standard Finance plc
('Non-Standard Finance', 'NSF' or the 'Company')
Launch of scheme of arrangement ('Scheme') and update on
proposed recapitalisation
17 March 2023: Non-Standard Finance announces the launch of the
Scheme and provides an update on the proposed recapitalisation (the
"Proposed Recapitalisation") of the NSF group (the "Group"). The
Scheme, if successful, will provide certainty on the extent of the
Group's liability for historical redress claims, paving the way for
a capital raise which, if successful, would restore the Group's
balance sheet, fund the partial payment of redress claims under the
Scheme and return Everyday Loans (branch-based lending) to
profitable trading.
Scheme
Everyday Lending Limited, the wholly owned subsidiary of NSF
which runs Everyday Loans and previously ran George Banco and Trust
Two until they ceased new lending in November 2020, launches the
Scheme today through the issuance of the Practice Statement Letter
("PSL") in relation to the Scheme.
As set out in the PSL, the Scheme will compromise:
-- subject to certain limited exceptions, claims in relation to any
activity which occurred on or before 31 March 2021 in connection
with a loan provided by Everyday Loans, George Banco or Trust
Two (the "Redress Claims"); and
-- case fees owed to the Financial Ombudsman Service (the "FOS")
arising from complaints referred to the FOS on or after 17 March
2023 in relation to any activity which occurred on or before 31
March 2021 in connection with a loan provided by Everyday Loans,
George Banco or Trust Two (the "FOS Fees").
Under the Scheme, GBP14 million (the "Scheme Fund") will be made
available for payment to customers with valid Redress Claims and
the FOS (the "Scheme Creditors"), in exchange for the release of
the Redress Claims and the FOS Fees in their entirety. Scheme
Creditors are estimated to receive between approximately 22% and
28% recovery.
The Group has negotiated the financial terms of the Scheme with
a committee of customers, which decided that it preferred the
Scheme over an insolvency process.
The FCA has reserved its position on the operation of the Scheme
until it has completed its assessment of the proposals. The FCA has
only very recently been provided with final details of the Scheme
proposals.
The FCA has informed the firm that once the terms of the Scheme
have been finalised and communicated to it, in the event that the
FCA is not satisfied with the Scheme terms, it reserves the right
to take any action it may consider appropriate, including to oppose
the Scheme in Court.
Under the current expected timetable, the Court convening
hearing will be held on 28 April 2023, the creditors' meeting where
the Scheme Creditors will vote on the Scheme will be held virtually
on or around 12 June 2023, and the Court sanction hearing will be
held on 22 June 2023. Once sanctioned, the Scheme will be
conditional upon the Scheme Fund being funded through the proceeds
of the Proposed Recapitalisation or the Alternative Transaction (as
defined below).
The Group is now relying on DISP 1.6.2R(2), pursuant to which
the business is able to place a temporary hold on the processing of
customer complaints included in the Scheme, as it is not in a
position to provide a final response to these claims until the
conclusion of the Scheme process.
Proposed Recapitalisation
The Scheme is a key component of the Proposed Recapitalisation,
which will ensure the future of the Group and the Everyday Loans
business. The Group's intention is for the Proposed
Recapitalisation to be implemented shortly following Court sanction
of the Scheme.
The Proposed Recapitalisation will involve:
-- NSF raising gross proceeds of approximately GBP95 million through
a public equity raise, part of which will be applied towards the
cost of the equity raise and part of which will be used to fund
the Scheme Fund and cover the costs of the Scheme, with the remainder
being invested in the Everyday Loans business;
-- the Group's secured lenders releasing a portion of their secured
debt in exchange for shares in NSF;
-- the extension of the maturity date under the Group's secured debt
facilities from August 2023 to June 2027; and
-- the Company and its advisers exploring the cancellation of NSF's
listing on the Main Market of the London Stock Exchange plc and
its admission of its enlarged share capital to trading on AIM.
The Proposed Recapitalisation has the support in principle of
NSF's largest shareholder and the Group's secured lenders, subject
to agreement on the terms and other conditions described below and,
in the case of NSF's largest shareholder, further diligence on and
its assessment of the Group's revised business plan and financial
projections.
NSF expects the equity raise to include both a placing with new
and existing institutional investors as well as an open offer
component, whereby existing shareholders will be provided with an
opportunity to participate in the capital raise. The structure,
detailed terms and viability of the equity raise are expected to be
confirmed in Q2 2023 following consultation with major shareholders
and potential investors.
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.
Completion of the Proposed Recapitalisation is subject to the
agreement of terms between lenders and the Group's largest
shareholder, and a number of conditions, including Court sanction
of the Scheme, shareholder approval, the take-up of shares under
the equity raise and execution of definitive documents. Assuming
all conditions are satisfied, NSF expects the Proposed
Recapitalisation to complete at the end of Q2 2023 or the start of
Q3 2023.
The Group has also agreed with its secured lenders to implement
an alternative transaction if the Scheme is sanctioned but the
conditions to the Proposed Recapitalisation are not satisfied (the
"Alternative Transaction"). The Alternative Transaction would
involve a transfer of the ownership of the Group's business to the
secured lenders in exchange for the release of a portion of their
secured debt and the provision of a new lending facility. Part of
the proceeds from this new lending facility would be used to fund
the Scheme Fund and cover the costs of this Scheme. Under the
Alternative Transaction, there would be no recovery for the
Company's shareholders.
In the event that the Scheme is not sanctioned by the Court, or
the Scheme is sanctioned but the Proposed Recapitalisation and
Alternative Transaction both fail, then the Group would remain
insolvent and the most likely outcome would be a Group-wide
insolvency (most likely administration), resulting in no return for
current shareholders, a significantly reduced return for secured
lenders and minimal or no cash recovery for customers with valid
redress claims.
This announcement contains inside information as stipulated
under the Market Abuse Regulations (EU) No. 596/2014 as it forms
part of UK domestic law by virtue of the European Union
(Withdrawal) Act 2018. The person responsible for arranging the
release of this announcement on behalf of Non-Standard Finance plc
is Sarah Day, Chief ESG Officer and Group Company Secretary.
Jono Gillespie, Group Chief Executive, 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. It has been a long journey to reach this point
and I am thankful to all our stakeholders, including the customer
committee, who have helped us get here. I would also like to
express my sincere thanks and admiration to all the branch-network
team at Everyday Loans who have continued to give 100% throughout
this difficult period."
For more information:
Non-Standard Finance plc
Jono Gillespie, Group Chief Executive
Officer
Sarah Day, Chief ESG Officer and Company
Secretary +44 203 869 9020
Cenkos Securities plc
Nicholas Wells
Ben Jeynes
Callum Davidson +44 207 397 8900
H/Advisors Maitland +44 207 379 5151
Neil Bennett +44 7900 000777
Jay Turner +44 7867 341385
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END
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