Lender faces insolvency as largest shareholder pulls out of rescue plan

Alchemy, the largest shareholder in troubled West Yorkshire credit provider Non-Standard Finance (NSF), has withdrawn its backing for a recapitalisation plan, NSF told the London Stock Exchange this morning.

Alchemy’s nominated non-executive director Toby Westcott has stepped down as a director of Nostell-based NSF with immediate effect.

NSF said in March that its recapitalisation plan would effectively reduce existing shareholder’s holdings to “negligible value” unless the backed the scheme, announced following February’s announcement by the lender that its balance sheet was “deeply insolvent”.

It now says that though it intends to proceed with a redress scheme to settle £14m of historical claims, it is more likely that its business will be transferred to secured lenders  in return for release of a portion of their secured debt and the provision of a new lending facility – a move NSF calls the “alternative transaction”.

In April the firm posted a 25% fall in revenues and normalised pre-tax losses of £25m in its full-year results for 2022.

“Both the alternative transaction and the proposed recapitalisation will secure the future of the everyday loans business and allow it to pursue its growth plans providing an invaluable service for its customers,” NSF said in its statement to the London Stock Exhange. “However, the proposed recapitalisation will materially dilute the interests of NSF’s existing shareholders, most likely to negligible value, unless they choose to participate in the equity raise, and the alternative transaction will unfortunately result in no recovery for NSF’s shareholders.

“The board is continuing to consider a range of options for the NSF plc ultimate parent company in the event the alternative transaction is implemented, but the most likely outcome is an orderly winddown following implementation of the alternative transaction.

“In the event that the scheme is not sanctioned by the court, or the scheme is sanctioned but the proposed recapitalisation and the alternative transaction both fail, then the group would remain insolvent and the most likely outcome would be a group-wide insolvency (most likely administration), also resulting in no return for current shareholders.”