Cattles secures £500m lending extension
ALL lenders of Cattles’ £500m syndicated banking facility have agreed to extend the facility until the end of the year, the Leeds-based lender has said.
The troubled firm also announced that it has entered further agreements and facility amendments with all its bank lenders and US Private Placement noteholders with an aim towards immediately stabilising the financial position of Welcome Financial Services (WFSL) and other subsidiaries.
Cattles and WFSL remain in discussion with all their financial creditors with a view to achieving a formal standstill agreement.
It’s good news for the lender, which last week failed to make an interest payment to its bondholders.
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Cattles said that holders of about £400m of a 7.125% bond due for repayment in 2017 had not received the interest payment due on July 5.
The July 5 bond payment was the first of two deadlines faced this month by the company.
It has been in talks with a syndicate of 22 banks led by Royal Bank of Scotland to refinance £500m of wholesale funding by July 14.
The company had earlier negotiated a standstill agreement under which payments to debtholders would be suspended while a restructuring arrangement was worked out.
Discussions have been affected by disagreements among debtholders over who would rank highest in payment priority if Cattles went into administration.
The banks believe they rank ahead of bondholders because of a guarantee given to the banks by Welcome, a Cattles subsidiary, that banks and private placement
noteholders will receive most of the cash the company gets back from its customers. Bondholders dispute this.
At the beginning of July Cattles confirmed it had dismissed six suspended executives and that chief executive David Postings was leaving with immediate effect.
The announcement followed the completion of an investigation into its accounts by law firm Freshfields Bruckhaus Deringer and business advisers Deloitte.
Earlier this year the investigating firms confirmed there had been a breakdown of internal controls, which had resulted in the group’s impairment policies being applied incorrectly.
As a consequence, Cattles will not only have to restate last year’s accounts to the tune of £700m in impairment provisions but has warned that previous year’s financial statements may also need to be adjusted as well.
The sum was additional to £400m already identified and confirmed the Leeds firm’s earlier fears of a “significant” pre-tax profit loss for the year ended December 31.
The revelation resulted in Cattles asking asked for its shares to be temporarily suspended from the stock market in April because of fears it would not be in a position to publish its annual figures for the year ended December 31, 2008 in time as talks to refinance its debt continue.
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