FNFC shares plunge after loan setback

SHARES in First National Finance Corporation plunged 16p to 61p yesterday as the company revealed serious setbacks to a pounds 250m financing package.

The biggest blow is that a pounds 150m securitisation of loans has been held up while the company asks its bankers for waivers to allow it to proceed. But the company has also been forced to drop a pounds 100m bank financing proposal because the response from banks approached to lend the money has been disappointing.

The securitisation - a sale of loans converted into tradeable bonds - has been held up because FNFC's advisers have discovered breaches of a 'technical nature' in covenants dating back to at least 1987.

The covenants appear to conflict with each other and the banks must agree in writing to change them. Tom Wrigley, chief executive, said this could take as long as a month.

Kenneth Cox of Barings, the adviser on the securitisation, said there was no linkage between it and the bank loan problem.

The pounds 250m plan was part of a refinancing of the group, which planned to overhaul its borrowings and raise funds by selling assets. Last year FNFC lost pounds 31.8m before tax.

There was confusion when Mr Wrigley initially said the credit rating agency Standard & Poor's discovered the problems in the securitisation agreements. But a spokesman for S&P said: 'We haven't seen any of the loan agreements,' and it is understood that S&P was not responsible for pointing out the breaches.