London Scottish Bank goes to the wall

TROUBLED Manchester financial services company London Scottish Bank was placed in administration today after desperate attempts to raise finance or find a buyer failed.

 The company, which offers debt collection and finance, has had a torrid year as offer talks failed after failing to raise £32.5m to cover a regulatory capital shortfall.

LSB accepted deposits, and provided loans principally through door-to-door collection as well as mortgage business including ‘right-to-buy’ under local authority housing sales.  The bank has approximately 10,000 depositors. 

The administration follows action by the financial watchdog the FSA ro stop LSB, which has 700 staff,  accepting deposits.

 A statement to the Stock Exchange this morning said: “Whilst a number of parties remain interested in acquiring the group, there can be no certainty that any offer will be made for the Group on a viable basis or that the regulatory capital shortfall can be remedied in the short to medium term.

“Without the certainty of an offer for the group or the regulatory capital shortfall being remedied, the FSA yesterday took action to impose a requirement on the company’s permission to prevent it from accepting deposits and the company is therefore unable to renew maturing deposits.”

 The Treasury and the Financial Services Compensation Scheme said that no retail depositor will lose any money on their deposits as a result of the administration. 

While LSB did not offer retail banking like the major players, more than £275m is owed to bond-holders.

The company said it will seek to work closely with the administrators to minimise the effect on employees.

In October the Deansgate-based group said it was looking for a buyer for the whole group or just its profitable Salford Quays-based debt collection business Robinson Way.

At August 31 the group had a net debt of £238m.

Ernst & Young, which has been appointed administrator, said the group was continuing to trade a present.