Provident Financial PLC Scheme of Arrangement update (5826C)
21 Junio 2021 - 8:00AM
UK Regulatory
TIDMPFG
RNS Number : 5826C
Provident Financial PLC
21 June 2021
Provident Financial plc
Scheme of Arrangement update
Provident Financial plc ("the Group" or "PFG") provides the
following update on the Consumer Credit Division ("CCD") Scheme of
Arrangement ("the Scheme"), following the judgement handed down on
the Amigo scheme.
Malcolm Le May, Chief Executive Officer, commented:
"To help customers fully understand the Scheme, we have
appointed a customer advocate to answer customer queries, obtained
an independent valuation report into CCD, and are today providing
customers with an update explaining the closure of CCD and
strengthening the explanation of the Scheme. Since the Scheme was
announced, CCD has been put into managed run-off, a process which
is expected to conclude in 2022. As previously stated, if the
Scheme is not approved by the creditors or the Court, the CCD
companies are highly likely to commence insolvency proceedings, in
which case customers will receive no redress payments. We therefore
continue to believe that the Scheme is fair and in the best
interests of CCD customers."
Scheme of Arrangement update
On 15 March 2021, PFG notified the market of its intention to
launch a Scheme of Arrangement in response to the rising cost of
CCD customer complaints based on historic lending. Today PFG has
updated the Scheme creditors, taking into account the judgement
handed down in relation to the Amigo scheme. The key updates being
announced to the Scheme's creditors are:
-- Jon Yorke has been appointed as customer advocate in respect
of the Scheme. He will respond to customers' questions about the
Scheme, attend the Scheme Meeting, and provide a report to the
Court on his findings. The customer advocate has hired McCarthy
Denning, a law firm, to provide advice through him to any customers
who require it; and
-- The Scheme will be amended so that if CCD generates surplus
cash between the Scheme becoming effective and completion of the
wind-down of CCD, that surplus will also be paid to creditors with
valid claims under the Scheme. However, PFG believes it is highly
unlikely that there will be any surplus cash resulting from the
wind-down of CCD.
In addition to these actions, PFG has appointed Ernst and Young
LLP (EY) to undertake an independent valuation assessment of CCD.
The assessment undertaken by EY further supports PFG's position
that CCD has no value and that if the Scheme is not endorsed by the
Court, it is highly likely that the CCD companies would commence
insolvency proceedings and CCD would not be in a position to make
any compensation payments to customers.
PFG is under no legal duty to fund the CCD companies, and has to
act in the best interests of all its stakeholders. PFG believes it
is right to support customers, employees and other stakeholders in
CCD through the managed wind-down of the business and the Scheme,
and that it should contribute GBP50 million to the Scheme and cover
the related costs (but no more). This needs to be seen in the
context of PFG having made a net contribution of approximately
GBP450 million to CCD between 2007 and 2020 (including provision of
GBP65 million for the Scheme) and of the ongoing losses for the
division.
As a result of the additional extensive communication plans PFG
has put in place to explain the Scheme to CCD customers, and the
extended duration of the Scheme process, Scheme costs are expected
to be approximately GBP20 million, GBP5 million higher than
originally announced.
PFG will continue to communicate and encourage creditors to
vote. Part of the increased administration cost of the Scheme has
been to achieve a high voter turnout, which PFG feels is important
for the Scheme. The increase in Scheme administration costs, as
previously stated, will be met by PFG, and will not reduce the
GBP50 million allocated for customer redress.
CCD Managed run-off update
CCD was put into managed run-off on 10 May 2021 and is going to
plan. PFG received one potential offer for CCD but this offer was
only to wind up the division. PFG rejected the offer as it was less
attractive financially than managing the run-off of the division
itself. CCD has applied to rescind its permission to issue loans
and the FCA has accepted this application, which means PPC can no
longer issue loans. CCD is also continuing with its consultation
process for colleagues. As CCD continues to collect out its loan
book, colleagues will be leaving the division from July onwards,
with the plan to close CCD by 2022.
Enquiries:
Analysts and shareholders:
Owen Jones, Group Head of
Investor Relations 07341 007842
Owen.jones@providentfinancial.com
Media:
Richard King, Provident Financial 07919 866876
Nick Cosgrove/Simone Selzer,
Brunswick 0207 4045959
providentfinancial@brunswickgroup.com
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