Provident Financial PLC Scheme of Arrangement update post FCA Letter (1409F)
14 Julio 2021 - 1:00AM
UK Regulatory
TIDMPFG
RNS Number : 1409F
Provident Financial PLC
14 July 2021
Provident Financial plc
Scheme of Arrangement update post FCA letter
Provident Financial plc ("the Group" or "PFG") provides the
following update on the Consumer Credit Division ("CCD") Scheme of
Arrangement ("the Scheme"), following the Group's receipt of a
letter from the Financial Conduct Authority (FCA).
PFG has engaged constructively with the FCA prior to and since
the market was notified of the intention to launch the Scheme for
CCD on 15 March 2021. The Scheme is being proposed in response to
the rising cost of customer complaints in CCD for historic lending
as a result of industry dynamics which have changed the operating
environment for CCD materially. PFG believes the Scheme is fair and
in the best interests of CCD customers.
PFG received a letter last night from the FCA, dated 13 July,
which stated:
"The FCA has assessed the Scheme by reference to the FCA's
statutory objectives and has concluded that the Scheme is
inconsistent with the FCA's rules, principles and objectives.
Therefore, the FCA does not support the Scheme and has summarised
the serious concerns it has regarding the Scheme in this
letter.
However, in this case the FCA has decided not to appear in Court
to oppose the sanction of the Scheme as a matter of company law.
The FCA's assessment of the Scheme against its statutory objectives
is a distinct, and necessarily broader, assessment than whether the
Court will sanction the Scheme as a matter of company law. In this
case, the FCA's decision not to oppose in Court is based on two key
factors:
1. The Lenders face an imminent insolvency in which many Redress
Creditors would receive less than under the Scheme; and
2. The Lenders are not continuing their business and there
appears to be no unfair benefit to the Group and its stakeholders
at the expense of Redress Creditors."
The full text of this letter will be published on the FCA's
website and also made available on PFG's website.
Malcolm Le May, Chief Executive Officer, commented:
"Although the FCA has confirmed it does not support the Scheme
and has summarised a number of concerns, I am pleased that the FCA
has decided not to appear in Court to oppose the sanction of the
Scheme. We continue to believe that the Scheme is fair and in the
best interests of CCD customers. As I have said previously, we are
committed to delivering the Scheme successfully and the FCA
deciding to not oppose the sanction of the Scheme in Court takes us
one step closer to being able to do just that. The next step in the
Scheme process is the creditors' meeting on 19 July and, if
approved at that meeting, the Court sanction hearing on 30
July."
PFG believes the confirmation from the FCA that it is not going
appear in Court to oppose the sanction of the Scheme is the right
decision for CCD's customers. Without the Scheme, CCD customers are
highly likely to receive no redress payments, as it is highly
likely that the CCD subsidiaries would commence insolvency
proceedings and would therefore not be in a position to make any
compensation payments to customers.
The Scheme requires more than 50% of all creditors by number who
vote on the Scheme to vote in favour, and the total value of their
claims to represent at least 75% of the value of the claims of all
creditors who vote. The result of the combined creditors' vote will
be announced as soon as possible following the creditors'
meeting.
Assuming the vote is passed by the statutory majority at the
creditor meeting, the Scheme will be considered by the High Court
at the sanction hearing on 30 July 2021, where the Court will
either approve the Scheme or not. The judgment from the sanction
hearing may be handed down either on the day of the hearing or a
number of days later. The result will be announced as soon as
possible after the judgment is received.
Since 10 May, when CCD was put into managed run-off its
receivables book has reduced to GBP42m as at the end of June, and
over 1,000 colleagues have now left the business. PFG's view
remains that the Scheme and managed run-off is the best outcome for
customers and its stakeholders and will present that case to the
Court.
If the Scheme is approved by a vote of the Scheme creditors and
the judgment of the Court, the Scheme is expected to become fully
effective in August this year and customers with valid claims are
expected to receive compensation by late 2022. If the Court were to
reject the Scheme, PFG intends to withdraw financial support for
the CCD subsidiaries and the CCD subsidiaries would then be
expected to commence insolvency proceedings, in which case
customers would receive no compensation.
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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