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RNS Number : 4569J
Morses Club PLC
13 December 2022
13 December 2022
Morses Club PLC
Issue of Practice Statement Letter and update on the Scheme of
Arrangement
Morses Club PLC ("Morses Club" or the "Company" and, together
with its subsidiary undertakings, the "Group"), an established
provider of non-standard credit services, provides an update on the
progress of the Scheme of Arrangement, the issue of a Practice
Statement Letter ("PSL") and a proposal to finance the Scheme
largely through an issue of equity.
A scheme of arrangement is an agreement between a company and
its creditors (or a group of creditors). A scheme of arrangement
will bind the company and each of the creditors affected if:
(a) it is approved by a majority in number (that is more than
50%), representing 75% or more in value, of the creditors who vote
on the scheme of arrangement;
(b) the Court approves the scheme of arrangement at a Court
hearing. The Court will consider the scheme and only approve it if
the legal requirements for doing so have been met; and
(c) a copy of the Court order approving the scheme of
arrangement is filed with the Registrar of Companies.
A scheme of arrangement would become effective on the date on
which the last of these steps occurs. When the scheme of
arrangement is effective, the company and its relevant creditors
are bound by it.
As the Scheme provides protection against historic liabilities,
it is Morses Club's intention to continue trading once the Scheme
is in operation and has engaged with key stakeholders regarding its
go-forward business proposition accordingly.
Faced by the on-going material uncertainty arising from the
current complaints situation, Morses Club considers that the Scheme
is the best way to treat the Scheme Creditors fairly. In deciding
to commence a Scheme process, Morses Club has also considered the
alternatives to a Scheme. If the Scheme does not proceed, then the
Directors continue to believe that the Company could no longer
continue as a going concern and it will need to commence insolvency
proceedings, which would lead to a materially worse outcome for
customers and all other stakeholders.
Morses Club has incorporated a new wholly owned subsidiary,
Morses Club Scheme Limited ("SchemeCo"), for the purpose of
SchemeCo applying for a Scheme of Arrangement under Part 26 of the
Companies Act 2006 ("Scheme").
As the next stage in the progression of the Scheme, SchemeCo is
today issuing a PSL to relevant customers and the Financial
Ombudsman Service ("FOS") pursuant to Practice Statement
(Companies: Schemes of Arrangement under Part 26 and Part 26A of
the Companies Act 2006 dated 26 June 2020). A copy of the PSL will
also be available at www.morsesclubscheme.com . The Court convening
hearing for the Scheme is listed for 7 March 2023 and further
information is provided in the PSL. The convening hearing is to
provide legal sanction for the Scheme, and to define the Scheme
Creditors (as defined below). SchemeCo will seek to contact all
known Scheme Creditors to inform them of the Scheme and provide
them with a copy of the PSL. There will also be advertisements in
certain national newspapers and social media. Morses Club wants to
ensure that all eligible customers are able to vote on the Scheme
and participate in it as far as possible.
As detailed in the PSL, SchemeCo is the only applicant for the
Scheme. In summary, (the details are available in the PSL), the
creditors under the Scheme are, subject to limited exclusions:
1. All current and former customers with any potential redress
claims in relation to historic loans made by Morses Club (or which
it is otherwise responsible for) which were made between 1 April
2014 and 2 August 2022. These redress claims are in respect of
affordability, sustainability and suitability, so that the Scheme
will provide certainty to the total liability arising from these
customer complaints; and
2. Certain related liabilities owed to the FOS.
Together, the eligible customers and the FOS are the "Scheme
Creditors". All other creditors of Morses Club are not party to the
Scheme and their rights are unaffected by it, so there is no action
for any such persons to take.
Compensation fund and proposed share issue
A compensation fund of at least GBP20m is proposed to fund the
Scheme comprising two elements:
1. GBP15m, or if greater, the fair value of Morses Club, (based
on an independent market valuation which will be provided before
the end of FY23), is to be contributed into the compensation fund
by the Company. The Company proposes to finance this by the issue
of equity, in June 2024, on the basis of at least 19 New Ordinary
Shares for each existing Ordinary Share which will result in
existing shareholders being diluted by at least 95%. This issue
will be conditional on shareholder approval at a General Meeting
which is expected to be held by the end of February 2023. While the
funding itself will not occur until the end of the Scheme process
in June 2024, the Company is seeking investors who will agree to
guarantee the funding before the Court convening hearing which is
listed for 7 March 2023. In the event that such an arrangement is
not made, or shareholders do not approve the fund raise the Scheme
will not proceed, and the Company will need to commence insolvency
proceedings.
The Scheme will also need the approval of the requisite majority
of Scheme Creditors and, thereafter, the Court in order to become
effective.
2. GBP5m, or if greater, the realisable value of Morses Club
assets less certain costs and operating provisions, is to be
contributed into the compensation fund by Morses Club by 29 March
2024. If there is insufficient money to pay the Morses Club funding
into the compensation fund by this date, then Morses Club will not
pay any money into the fund, and the equity funding will not
complete with the consequence that the Scheme would terminate
immediately and Morses Club would enter into insolvency
proceedings.
The Directors are of the opinion that it is in the best
interests of the Company, its subsidiaries and all stakeholders to
proceed with the commencement of the Scheme as quickly as
possible.
The Company announced on 11 August that it was pausing the
processing of all new unaffordable lending claims with effect from
that date, and the pause remains in place. However, the FOS has to
date not agreed to pause complaint processing and is handling
complaints referred to the service.
Morses Club has continued discussions with the Financial Conduct
Authority ("FCA") and the FOS, to keep them informed of the Scheme
as it has progressed. In connection with the Scheme, the FCA
required the appointment of a skilled person under section 166 of
the Financial Services and Markets Act 2000. The Company
subsequently appointed Avyse Limited to conduct the skilled person
review of the redress methodology, and a report has been submitted
to the FCA accordingly.
The PSL contains the following statement from the FCA:
'Morses Club Scheme Limited has issued this PSL without the
support of the FCA. The FCA has not yet been given opportunity to
complete its assessment of the Scheme, in particular its underlying
methodology for assessing claims.
The FCA has only recently received all the information from
Morses Club PLC to the standard required. The FCA needs to assess
the information before being in a position to know whether it
intends to formally object to the Scheme.
The underlying methodology for determining claims is a critical
component of the Scheme. As the FCA has not completed its review of
the methodology, the FCA is concerned that the expected outcomes
may not be credible, and that the proposed scheme may not be the
best deal that Morses Club PLC can offer to redress customers.
The FCA has informed Morses Club PLC that it reserves the right
to take such action as it may consider appropriate once the terms
of the Scheme and its methodology have been finalised and the FCA
has completed its review.
Morses Club PLC has provided an undertaking that it will reissue
the PSL if the FCA advises it is necessary to do so at any time
prior to the convening hearing. The FCA reserves its right to
object to the Scheme at any stage.'
Morses Club is continuing to work closely with the FCA and will
update the market should it be necessary to reissue the PSL.
Gary Marshall, CEO of Morses Club, said:
"We continue to work on finalising the detail of a Scheme, and
the issuing of a PSL to Scheme Creditors is a significant step in
progressing the Scheme and removing the uncertainty of the
Company's ongoing redress claims liability. Without the certainty
provided by a Scheme, there continues to be material uncertainty
that the Company could continue as a going concern. Despite the
challenges which the business faces, we will work with all our key
stakeholders to ensure the best outcome for our customers, and the
survival of the Company".
This announcement contains inside information for the purposes
of Article 7 of the Market Abuse Regulation (EU) 596/2014. The
person responsible for this announcement is Graeme Campbell, Chief
Financial Officer.
For further information please contact:
Morses Club PLC Tel: +44 (0) 330
Gary Marshall, Chief Executive Officer 045 0719
Graeme Campbell, Chief Financial Officer
Peel Hunt (Nominated Adviser) Tel: +44 (0) 20
Paul Shackleton / Andrew Buchanan / Sam Milford 7418 8900
(Investment Banking Division)
Camarco Tel: +44 (0) 20
Jennifer Renwick / Charlotte Hollinshead 3757 4994
Notes to Editors
About Morses Club
Morses Club is an established provider of non-standard financial
services in the UK. The Group consists of Morses Club, the UK's
largest home collected credit ("HCC") provider(1) , and Shelby
Finance Limited, Morses Club's Digital division, which operates
under the online brand Dot Dot Loans, an online lending provider.
The Group's growing Digital capabilities and scalable, highly
invested IT platform has enabled Morses Club to deliver a broad
range of lending products and services to the non-standard credit
market.
UK HCC is considered to be a specialised segment of the broader
UK non-standard credit market. UK HCC loans are typically small,
unsecured cash loans delivered directly to customers' homes.
Morses Club's HCC division is the largest UK Home Collected
Credit (HCC) lender(1) with 116,000 customers throughout the UK.
The HCC division enjoys consistently high customer satisfaction
scores of 95%(2) . In 2019 the Company introduced an online
customer portal for its HCC customers, which now has over 95,000
registered customers which is 82% of HCC customers.
The Group's Digital division, Shelby Finance, operates under the
online brand Dot Dot Loans providing online instalment loans of up
to 48 months to c. 25,000 active customers.
Morses Club listed on AIM in May 2016.
About the UK non-standard credit market
The UK non-standard credit market, of which UK HCC is a subset,
consists of both secured and unsecured lending and is estimated to
comprise around 10 million consumers(3) and total loan receivables
of GBP9.6bn(4) .
Non-standard credit is the provision of secured and unsecured
credit to consumers other than through mainstream lenders. Lenders
providing non-standard credit principally lend on an unsecured
basis and the market is characterised by high frequency borrowing.
Approximately 2 million people move annually between standard and
non-standard markets (4) .
Since February 2014, unsecured personal lending has grown from
GBP161 billion to GBP225 billion in February 2020. It has since
contracted to GBP197 billion in August 2021(5) .
(1 Based on Net Loan Book of GBP45.3m as at 28 August 2021 2
Independent Customer Satisfaction Survey conducted by Mustard 3 FCA
High Cost Credit Review Technical Annex 1: CRA data analysis of UK
personal debt - July 2017 4 Apex Insight - Non-Prime Consumer
Credit: UK Market Insight Report - December 2020 5 Table A5.2, Bank
of England Money and Credit Bank stats August 2021)
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