The troubled doorstep lender Cattles, which has not written any new loans for nine months, said yesterday that it plans to axe up to 510 jobs at its Welcome Finance division and close 30 branches.
The decision is the first from Cattles' new board, which took control of the company following the dismissal of seven directors two months ago after "a breakdown in internal controls" at the Welcome lending unit. The heavily indebted group's shares have been suspended since April after the the deadline to publish its 2008 results was missed. They have still not been released.
In the 12 months before trading ceased, the stock had lost more than 95 per cent of its value.
Cattles said yesterday that the smaller business would "better align the network with reduced levels of lending and will deliver efficiencies in line with Cattles' commitment to manage the business through cost-efficient operations and improved cash collection processes". It will now enter a consultation period with affected staff.
The group stopped writing new business in January when it said it would be looking for ways to cut costs.
The group also said yesterday that it was "still in constructive discussions with its key financial creditors to obtain a standstill agreement". Cattles has £2.4bn of debt but last July was able to extend the deadline of a £500m facility which had been due to be repaid. The company's lead lender is the Royal Bank of Scotland.
Cattles insists that the negotiations are constructive but some analysts argue that the banks are trying to limit their losses on the group.
"I do not think that Cattles is still a going concern," said James Hamilton, an analyst at Numis Securities in July. "The banks are no doubt looking at what remains of the group and considering ways of extracting the best value they can. What is clear, however, is that this model does not work."
The group's problems date back to last year when the banking crisis caused the collapse of the wholesale lending markets on which it relied to write new business. Cattles' subsequent application for a banking licence, which would have allowed it to take deposits, was rejected by the Financial Services Authority.
The former chief executive David Postings left the company in July after the group sacked six other former board members, including the finance director James Corr. Mr Corr and five others had been suspended after the law firm Freshfields Bruckhaus Deringer had been asked to investigate irregularities at the Welcome business.
Cattles lends some amounts of money to borrowers on low incomes.Reuse content