CPP Group makes "encouraging progress" in restructuring

CPP Group today said it has made “encouraging progress” in its negotiations to restructure creditors and secure new equity funding.

The York-based insurer, which specialises in ID and credit card theft protection, was fined £10.5m by the Financial Conduct Authority in 2012 for mis-selling insurance products and is paying out £65.8m in compensation to customers.

In a trading update issued today, CPP said it has received indications of interest to subscribe for £9m of new equity while also being engaged in “supportive and constructive dialogue” with its creditors.

But any new equity raised would be “at a significant discount” to the prevailing share price of 10.75p at the close of business yesterday with expressions of interest received to date indicating that shares would be valued at 3p each.

The update adds “there can be no certainty that an agreement will be reached with the group’s creditors or that any equity raise will be completed” before adding “both are essential to the future development of the business”.

CPP added that it is also currently reviewing its status on the London Stock Exchange with a view to possibly transferring to AIM.

It confirmed that a takeover panel has granted the company a dispensation from the requirements of the “takeover code” which means that any party interested in the formal sale process will not be required to be publically identified.

Brent Escott, chief executive, said: “Since I became chief executive of CPP in September 2013 we have worked to provide the business with a more stable footing.

“Most significantly, we worked with the FCA, banks and card providers to agree and complete a successful consumer redress scheme for those customers affected by the group’s historical issues in the UK.

“The end of the scheme represented a very significant milestone for the business.

“Alongside this, the group has significantly lowered its cost base, improved processes and made progress in embedding new and enhanced systems.

“CPP today is providing a much improved service to our 5.2 million customers worldwide.

“As we move forward, today we have announced important steps towards securing new equity funding and progress in negotiations with the group’s creditors.

“We continue to evaluate all options to restructure the group’s balance sheet and strengthen the group’s capital position to support the successful future development of the business.

“The board is focused on ensuring the best possible outcome for all of CPP’s stakeholders and further announcements will be made in due course.”

In the period between June 30 to yesterday, group revenue from continuing operations has declined 37% on a constant currency basis compared to the same period in 2013.

The update adds that this reflects the on-going challenges of the operating environment which is primarily affecting trading performance in the UK business.

Over the same period, CPP Group has also closed two of its three office sites in the UK and also plans to leave Hong Kong and Brazil.