Non-Standard Finance plc

('NSF', the 'Company' or the 'Group')

11 March 2022

Update on outstanding regulatory matters

As previously announced, the Group has been working to resolve certain outstanding regulatory matters so that it might then proceed with a substantial capital raise  ('Capital Raise') that, if successful, would be used to fund customer redress as well as strengthen the Group's balance sheet and transform its prospects.  Following recent developments, the Board is issuing the following update on these matters.

Independent regulatory reviews into branch-based lending and home credit

Having first agreed their scope with the FCA, independent reviews into both branch-based lending and home credit were initiated in 2021 to consider the read-across from the multi-firm review into guarantor loans and to ensure that recent decisions at the Financial Ombudsman Service were taken into account in assessing whether or not any customers may have suffered harm. 

Whilst the conclusion of the review into branch-based lending (Everyday Loans) was that there is no requirement for any customer redress, in home credit the conclusion was that there may have been harm and, following extensive discussions with the FCA about how this should be defined and the implications for future lending, the Directors of SD Taylor Limited (trading as 'Loans at Home') reluctantly concluded that the Loans at Home business is no longer viable and so have applied to the FCA to grant permission for Loans at Home to be placed into administration and to appoint insolvency practitioners from Grant Thornton UK LLP as administrators.  The Boards of Loans at Home and of NSF are clear that this is the only option available in order to preserve value for creditors.  As the operations and activities of Loans at Home are separate from the rest of the Group, the Board of NSF confirms that, having now agreed certain waivers with the Group's lenders, the administration of Loans at Home will have minimal impact on the rest of the Group's business.

Proposed redress methodology in guarantor loans

Following the FCA's detailed review of the Group's proposed redress methodology for certain customers of its guarantor loans business, the Group is continuing to work with the FCA on finalising the operational mechanics of the scheme.  The board is hopeful that this will soon be finalised in order to provide certainty for investors so that it can then proceed with the Capital Raise that, if successful, will be used to fund customer redress as well as strengthen the Group's balance sheet and transform its prospects.

Planned capital raise

The Group intends to complete a substantial capital raise as soon as practicable and considering the regulatory developments detailed above, the Group is in discussions with its lenders to support this effort. The Group's largest shareholder, Alchemy Special Opportunities Fund IV L.P.('Alchemy'), has confirmed its continued support for the proposed Capital Raise.  Alchemy's support remains subject to: an outcome of the Group's engagement with its lenders that is acceptable to Alchemy; Alchemy's analysis of the outcome of the Group's discussions with the FCA regarding the regulatory position of the Group's divisions and the implications of that on (and Alchemy's assessment of) the Group's business plan and financial projections; and greater levels of certainty around redress and claims.

If successful, the Capital Raise will reduce high levels of gearing, fund the payment of redress to certain customers of the Group and underpin the future growth of its lending operations. Should the Capital Raise be unsuccessful or take longer than expected to execute, then it is expected that the Group would remain in a net liability position from a balance sheet perspective, would breach certain borrowing covenants and as a result would likely not be able to access further funding over the period of breach and would require additional waivers from its lenders. In such circumstance, there would be a material risk of the Group going into insolvency.  However, the Directors continue to believe there is a reasonable prospect of resolving this position.

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ('MAR'), and is disclosed in accordance with the Company's obligations under Article 17 of MAR. The person responsible for making this announcement is the Director of IR and Communications.