Doorstep lender NSF needs fresh capital raise after covenants breach; shares tank (updated)

Non-Standard Finance

28/09/2022 09:22

(Adds details, background, share move)
       Sept 28 (Reuters) - Non-Standard Finance Plc  NSF.L 
slumped to a record low on Wednesday, after the British doorstep
lender said it would need to raise fresh capital after breaching
first and second quarter lending covenants critical to its
attempts to stay in business. 
    The loss-making company, which has obtained short-term
waivers from creditors on those breaches, said in a statement
that a fundraising could remedy the covenants but it would first
need greater clarity on the extent of liabilities linked to a
redress scheme set up to compensate some of its customers.
    Last year, the lender joined its larger rival Provident
Financial  PFG.L  in exiting its home credit market after facing
a sharp increase in complaints and intense regulatory scrutiny.
 urn:newsml:reuters.com:*:nL5N2OC23V
    NSF, whose lending unit entered into administration in
March, said it will pursue a court-based process, such as a
scheme of arrangement or restructuring plan to better ascertain
its redress liabilities. 
    "If successful, the proceeds of the capital raise will be
used to fund a cash pot which will be available to finance the
payment of redress liabilities to affected customers and to
strengthen the Group's balance sheet and underpin future
growth," NSF said in a statement.
    Shares in the company tanked as much as 58.7% to 0.77p as at
0756 GMT.
    The company said it did not expect the process will provide
for claims to be paid in full but without fresh capital, the
group's ability to remain a going concern was subject to
material uncertainties, it added.
    "Without the process, the directors believe a capital raise
would not be successful and therefore insolvency is the most
likely outcome, in which there would likely be no payment of
redress liabilities," NSF said.
 (Reporting by Sinchita Mitra in Bengaluru; Editing by
Subhranshu Sahu, Sinead Cruise and Rashmi Aich)
 ((Sinchita.Mitra@thomsonreuters.com;))