Redundancy risk at Cattles division
SUB-prime lender Cattles today warned that 450 staff face redundancy at its Welcome Financial Services division.
Shareholders at the Birstall-based lender have previously been told that Cattles is unable to recommend a business plan to its financial creditors that would allow its Welcome Financial subsidiary to lend to existing or new customers.
Cattles is focusing on collecting existing customer loans at Welcome.
Cattles today announced the closure of 70 local branches and collections units at Welcome nationwide.
The announcement comes after the group last year announced it would reduce headcount at the division by 500 jobs.
Margaret Young, executive chairman of Cattles, said: “These proposals to further streamline the Welcome organisational structure have been put forward after an extensive review and careful consideration.
“We believe they are essential to Cattles achieving a more cost efficient business model which mirrors the reducing size of the group’s loan book.”
Cattles is to consult staff about the proposals, with around 450 employees today receiving notice that they are at risk of redundancy.
Cattles enviages that collection of Welcome loans could take two to three years and that during the period the group’s cost base will contract to reflect the reducing size of the loan book.
In November, Cattles revealed it made a £555.3m loss in 2008. Bad debt charges totalled £778.9m last year.
The lender also lost £374.4m in the nine months to the end of September this year.
In 2007, for which its results have now been restated, it made a profit of £22.7m, after earlier guidance of a £165.2m profit.
In December, the lender confirmed that it had secured a “standstill and equalisation agreement” (SEA) from its key creditors, the banks, bondholders and noteholders, who are owed around £2.7bn.
The deal will give Cattles a chance to restructure and means its creditors will not force it into administration or demand the cash they are owed until July 2011.
Cattles said the SEA meant the group would have a better chance of stabilising its financial position.
The group has been hit by accounting failures, which meant bad debts were not properly accounted for.
