Insolvency fears grow at embattled lender
Troubled sub-prime lender Morses Club has created a new subsidiary company to enable it to enter a Scheme of Arrangement – but says insolvency proceedings are highly likely if the Scheme fails to proceed.
As we reported last month, the Nottingham-based firm slipped to a loss of almost £21m during the six months to 27 August and has been forced to “take steps” to constrain lending in key areas.
The news follows repeated warnings that Morses could enter insolvency unless it agrees a Scheme of Arrangement after it suspended processing claims made against its “unaffordable” loans.
Now, the company has established Morses Club Scheme Limited, or SchemeCo, for the purpose of applying for such a Scheme – an agreement between the company and its creditors – under Part 26 of the Companies Act 2006. It has proposed to finance the Scheme “largely through an issue of equity.”
SchemeCo will issue a PSL to relevant customers and the Financial Ombudsman Service today (13 December) ahead of a court hearing on 7 March 2023.
The Morses Club Board has proposed a compensation fund of “at least” £20m to finance the arrangement.
The firm’s directors told the London Stock Exchange this morning that Morses “could no longer continue as a going concern” if the plan fails.
Gary Marshall, CEO of Morses Club, said: “We continue to work on finalising the detail of a Scheme, and the issuing of a PSL to Scheme Creditors is a significant step in progressing the Scheme and removing the uncertainty of the Company’s ongoing redress claims liability. Without the certainty provided by a Scheme, there continues to be material uncertainty that the Company could continue as a going concern. Despite the challenges which the business faces, we will work with all our key stakeholders to ensure the best outcome for our customers, and the survival of the Company.”
The Financial Conduct Authority (FCA) has also issued a statement regarding the plans, which says it has “only recently” received all the information regarding the proposals “to the standard required.”
The authority said it reserved the right to object to the Scheme “at any stage.”
