REG - Non-Standard Fin - Scheme of Launch & Proposed Recapitalisation

Non-Standard FinanceAnnouncement

17/03/2023 07:00

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RNS Number : 2883T  Non-Standard Finance PLC  17 March 2023

Non-Standard Finance plc

('Non-Standard Finance', 'NSF' or the 'Company')

Launch of scheme of arrangement ('Scheme') and update on proposed
recapitalisation

17 March 2023: Non-Standard Finance announces the launch of the Scheme and
provides an update on the proposed recapitalisation (the "Proposed
Recapitalisation") of the NSF group (the "Group"). The 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 which, if successful, would
restore the Group's balance sheet, fund the partial payment of redress claims
under the Scheme and return Everyday Loans (branch-based lending) to
profitable trading.

 

Scheme

Everyday Lending Limited, 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, launches the Scheme today through the issuance
of the Practice Statement Letter ("PSL") in relation to the Scheme.

As set out in the PSL, the Scheme will compromise:

 ●    subject to certain limited exceptions, 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"); and

 ●    case fees owed to the Financial Ombudsman Service (the "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").

 

Under the Scheme, £14 million (the "Scheme Fund") will be made available for
payment to 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. Scheme Creditors are estimated to receive between
approximately 22% and 28% recovery.

The Group has negotiated the financial terms of the Scheme with a committee of
customers, which decided that it preferred the Scheme over an insolvency
process.

 

The FCA has reserved its position on the operation of the Scheme until it has
completed its assessment of the proposals. The FCA has only very recently been
provided with final details of the Scheme proposals.

 

The FCA has informed the firm that once the terms of the Scheme have been
finalised and communicated to it, in the event that the FCA is not satisfied
with the Scheme terms, it reserves the right to take any action it may
consider appropriate, including to oppose the Scheme in Court.

 

Under the current expected timetable, the Court convening hearing will be held
on 28 April 2023, the creditors' meeting where the Scheme Creditors will vote
on the Scheme will be held virtually on or around 12 June 2023, and the Court
sanction hearing will be held on 22 June 2023. Once sanctioned, the Scheme
will be conditional upon the Scheme Fund being funded through the proceeds of
the Proposed Recapitalisation or the Alternative Transaction (as defined
below).

The Group is now relying on DISP 1.6.2R(2), pursuant to which the business is
able to place a temporary hold on the processing of customer complaints
included in the Scheme, as it is not in a position to provide a final response
to these claims until the conclusion of the Scheme process.

Proposed Recapitalisation

The Scheme is a key component of the Proposed Recapitalisation, which will
ensure the future of the Group and the Everyday Loans business. The Group's
intention is for the Proposed Recapitalisation to be implemented shortly
following Court sanction of the Scheme.

The Proposed Recapitalisation will involve:

 ●    NSF raising gross proceeds of approximately £95 million through a public
      equity raise, part of which will be applied towards the cost of the equity
      raise and part of which will be used to fund the Scheme Fund and cover the
      costs of the Scheme, with the remainder being invested in the Everyday Loans
      business;

 ●    the Group's secured lenders releasing a portion of their secured debt in
      exchange for shares in NSF;

 ●    the extension of the maturity date under the Group's secured debt facilities
      from August 2023 to June 2027; and

 ●    the Company and its advisers exploring the cancellation of NSF's listing on
      the Main Market of the London Stock Exchange plc and its 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 the terms
and other conditions described below and, in the case of NSF's largest
shareholder, further diligence on and its assessment of the Group's revised
business plan and financial projections.

NSF expects the equity raise to include both a placing with new and existing
institutional investors as well as an open offer component, whereby existing
shareholders will be provided with an opportunity to participate in the
capital raise.  The structure, detailed terms and viability of the equity
raise are expected to be confirmed in Q2 2023 following consultation with
major shareholders and potential investors.

Although the Proposed Recapitalisation will ensure the future of the Group and
the Everyday Loans business, it will materially dilute the interests of NSF's
existing equity holders, most likely to negligible value, unless they choose
to participate in the equity raise.

Completion of the Proposed Recapitalisation is subject to the agreement of
terms between lenders and the Group's largest shareholder, and a number of
conditions, including Court sanction of the Scheme, shareholder approval, the
take-up of shares under the equity raise and execution of definitive
documents.  Assuming all conditions are satisfied, NSF expects the Proposed
Recapitalisation to complete at the end of Q2 2023 or the start of Q3 2023.

The Group has also agreed with its secured lenders to implement an alternative
transaction if the Scheme is sanctioned but the conditions to the Proposed
Recapitalisation are not satisfied (the "Alternative Transaction"). The
Alternative Transaction would involve a transfer of the ownership of the
Group's business to the secured lenders in exchange for the release of a
portion of their secured debt and the provision of a new lending facility.
Part of the proceeds from this new lending facility would be used to fund the
Scheme Fund and cover the costs of this Scheme. Under the Alternative
Transaction, there would be no recovery for the Company's shareholders.

In the event that the Scheme is not sanctioned by the Court, or the Scheme is
sanctioned but the Proposed Recapitalisation and Alternative Transaction both
fail, then the Group would remain insolvent and the most likely outcome would
be a Group-wide insolvency (most likely administration), resulting 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.

 

This announcement contains inside information as stipulated under the Market
Abuse Regulations (EU) No. 596/2014 as it forms part of UK domestic law by
virtue of the European Union (Withdrawal) Act 2018. The person responsible for
arranging the release of this announcement on behalf of Non-Standard Finance
plc is Sarah Day, Chief ESG Officer and Group Company Secretary.

Jono Gillespie, Group Chief Executive, said:

"We are very pleased to have reached this important milestone. Whilst 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, which should then lead the way towards a successful
recapitalisation of the Group and secure a successful future of our
branch-based lending business. It has been a long journey to reach this point
and I am thankful to all our stakeholders, including the customer committee,
who have helped us get here. I would also like to express my sincere thanks
and admiration to all the branch-network team at Everyday Loans who have
continued to give 100% throughout this difficult period."

 

 For more information:

 Non-Standard Finance plc                             +44 203 869 9020

 Jono Gillespie, Group Chief Executive Officer

 Sarah Day, Chief ESG Officer and Company Secretary

 Cenkos Securities plc                                +44 207 397 8900

 Nicholas Wells

 Ben Jeynes

 Callum Davidson

 H/Advisors Maitland                                  +44 207 379 5151

 Neil Bennett                                         +44 7900 000777

 Jay Turner                                           +44 7867 341385

 

 

 

 

 

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