£14m Scheme of arrangement and recapitalisation revealed for lender

Wakefield-headquartered Non-Standard Finance (NSF) has revealed its long-anticipated Scheme of Arrangement and an update on proposed recapitalisation.

It says the £14m 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.

If successful, the capital raise would restore the group’s balance sheet, fund partial payment of redress claims under the Scheme and return Everyday Loans (branch-based lending) to profitable trading.

Jono Gillespie, group chief executive, said: “While 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.

“This should then lead the way towards a recapitalisation of the group and secure a successful future of our branch-based lending business.”

Everyday Lending Ltd, 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, has launched the Scheme today.

It will mostly compromise 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).

It will also cover case fees owed to the Financial Ombudsman Service (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).

A £14m Scheme Fund will be made available for 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.

NSF says the Financial Conduct Authority (FCA) has reserved its position on the operation of the Scheme until it has completed its assessment of the proposals.

Once sanctioned, the Scheme will be conditional upon the Scheme Fund being funded through the proceeds of NSF’s proposed recapitalisation.

NSF aims for the recapitalisation to be implemented shortly following court sanction of the Scheme.

The proposed recapitalisation will involve NSF raising gross proceeds of around £95m through a public equity raise, part of which will cover the Scheme Fund, with the remainder being invested in the Everyday Loans business.

The group’s secured lenders would release a portion of their secured debt in exchange for shares in NSF.

Also, the company and its advisers would explore cancellation of NSF’s listing on the Main Market of the London Stock Exchange plc and the 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 terms and conditions.

NSF says although the recapitalisation will ensure the future of the group and the Everyday Loans business, it will materially dilute the interests of the group’s existing equity holders, “most likely to negligible value”, unless they participate in the equity raise.

It warns that if the Scheme is not sanctioned by the court, or it is sanctioned but the recapitalisation and alternative transaction both fail, then the likely outcome would be group-wide insolvency and administration.

NSF says this would result 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.

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