Cattles Share Discussion Threads

[spectoacc] 22/6/2009 12:43

Because they don't lose money on every loan - it's low-hanging fruit. Say they lend out £100, to 1,000 people, at 100% interest. On say 300 of those loans they get the full £200 back. Perhaps they get the full amount back, only delayed, on some others, and on the remainder the recovery varies from £0 upwards.

The issue is - do they recover enough to cover costs/interest & still make a profit. Until recently it seemed they did; now even the past few years are in doubt.

I still think the Cattles business will survive, albeit in a slimmed-down form. It's whether the current shareholders will own any of it that I've always doubted.

(I don't think the tarnished name is a problem though; just change it).

[badhshah] 22/6/2009 12:14

How would you understand the recent statement of david postins that "they collected net cash during first three months of this year". Net cash means capital+ profit, Doesn't it? .......and that is after accounting problem emerged.

I say as long as company is cash solvent which means fundamentally it is able to collect net cash I believe banks will support it without a need of D4E. I have said it beofore and well before than recent FT article.

[grahamburn] 22/6/2009 11:59

RNS's have to be worded carefully and sparingly, though the insertion of "constructive" before "discussions" does give a hint that there is light at the end of the tunnel. Until the accounts for last year - and adjusted accounts for previous years - are published, there is no way of knowing whether the Cattles was a genuinely profitable and cashflow positive company, either in the recent past or even EVER!

It isn't just be a matter of "accounting irregularities": it could be the whole business model is/was suspect. However, it is unlikely that the business would have prospered/survived as long as it has if that was the case. It is more likely that the accounts were only massaged in the recent past by executives who were trying to meet targets and were not monitored adequately. Otherwise, the problems would have come to light long ago. If so, then maybe the piggy bank (or is it cow bank?) might be bulging with cash and there is a prospect of reviving the business - unless the name has been tarnished too much by recent events.

[tom111] 22/6/2009 11:59

Sounds good to me

[spectoacc] 22/6/2009 11:16

"Cattles plc

Ongoing standstill discussions

Cattles notes the recent press speculation regarding discussions with its debt
providers and confirms that it is in constructive discussions with its debt
providers with a view to obtaining a standstill agreement.

A further announcement will be made when appropriate. "


Wish they'd say a bit more than that; nothing that's not posted above. A timetable/how the investigation's going/when the a/cs might be signed off wouldn't come amiss, let alone when the shares might be unsuspended.

[spectoacc] 22/6/2009 10:52

Badhshah, it's not the first time you've mentioned that Citi report and that the a/c irregularities are non-cash/irrelevant. They're not irrelevant - Cattles reported several years of healthy profits, but seems were actually making losses (though the a/cs aren't yet re-issued; they may try to just lump it all into the current year). Citi made their call based on CTT having previously been a profitable business, just one that built up too much debt.

In order to avoid taking bad debt charges, they were making larger loans to late-payers. That isn't sustainable. The amount of cash CTT need to get in to cover all their debts is the issue: the only way round it is injection of new capital (arm-twisted RBS) or D4E/loan write-offs. The prob is that neither of those leave much for shareholders.

"They are there not to wind up businesses but to support them for their own profit's sake" is partially what's happening of course; instead of using the money CTT are getting in to write new business, it'll get paid back to the banks/debtholders, who seem unable to agree who takes priority. But in the meantime it's much better to leave the business functioning/collecting money, than it is to wind it up/attempt to get the loaned money back in one go.

I fear this could drag on some time yet, particularly if litigation happens (potentially years). Only good for the lawyers if that happens.

[badhshah] 22/6/2009 10:42

I agree with JR50.
I always believed there would be no D4E and the business will be given a chance. If it is collecting money ahead of expectations, cutting costs, sorting out its accounts, bring in new management then why would lenders not support the business. They are there not to wind up businesses but to support them for their own profit's sake.

Just go back and read CITIBANKS' report which came out in January, they clearly state the business will come out smaller but viable. The only difference between that time and now is the emergence of accounting irregularities. Once that is sorted out then business is viable.

Spectoacc, its assets are its cash which is being collected at a healthy rate.

[spectoacc] 22/6/2009 09:05

Interesting that the banks/bondholders can't agree who ranks first; that explains a lot. Surely a standstill will be agreed with the next payment so close, though unconvinced the shares would relist on it.

I still think the best hope for shareholders is the policital angle - using the 70% ownership of RBS to force a bailout to help Labour voters.

I struggle to see where the value for shareholders after banks/bondholders have been paid is though; suspect the re-issued a/cs will show CTT has been loss-making for years. JJB's standstill was for a large disposal and a CVA to escape lease payments.

[alistair4444] 22/6/2009 00:06

Cattles close to securing creditor 'standstill'

By Anousha Sakoui and Jane Croft

Published: FTimes June 21 2009 17:55 | Last updated: June 21 2009 17:55

Cattles, which lends to people with patchy credit histories, is in the final throes of convincing bondholders and more senior creditors to agree to a "standstill" agreement that will allow it to fight for survival.

Two deadlines loom for the lender, which had its shares suspended in April and is completing an internal inquiry into its impairment provisioning policies.
EDITOR'S CHOICE
Cattles warns of further provisions - Apr-01
Cattles suspends three more executives - Mar-10
Cattles suspends executives and issues new alert - Mar-03
Cattles stops lending to new customers - Feb-23
Lombard: Cattles conundrum - Mar-03
Cattles shares halve as results postponed - Feb-20

It is due to pay a coupon to bondholders on July 5 and is in talks with a syndicate of 22 banks, led by Royal Bank of Scotland, to refinance £500m of wholesale funding by July 14.

Under a standstill agreement, payments to bondholders and debt refinancing would be suspended while the company sorts out its future.

However, it is possible that the company could make some sort of interim goodwill payment or gesture to bondholders and the banks.

One issue is that Cattles' bondholders and banks are arguing over which would rank highest if Cattles went into administration.

The banks think they rank ahead of bondholders because of a guarantee given to the banks by Welcome, a Cattles subsidiary, that banks and private placement noteholders will receive most of the cash the company gets back from its customers.

But the bondholders dispute this.

A standstill agreement would give the two sides more time to resolve the situation.

Some creditors are thought to want interest payments in exchange for the standstill, which could run until the autumn to allow time for creditors to reach agreement over a division of cash. If not, they could settle the dispute in court.

If it goes to court, the case could go to the House of Lords and, if bondholders won, it could set an important precedent for other companies.

Cattles also wants more time to see whether the banks will agree to a roll-over of debt in July. Unless RBS and the rest of the group's creditors agree to renew a £500m credit line that is about to expire, Cattles could potentially fall into administration.

However, there is a political dimension. RBS is 70 per cent owned by the UK government and Cattles is one of a tiny group that is still willing to lend money to families with poor credit records.

The worry in Whitehall is that if Cattles disappears, loan sharks and racketeers will fill the void.

Cattles has already suspended six executives earlier this year as it reviews its bad-debt policies.

The lender has commissioned law firm Freshfields and consultants Deloitte to examine its impairment provisions and said it expected to report significant losses for 2008.

[cpl593h] 21/6/2009 22:05

No so much, actually.

[jr50] 21/6/2009 21:29

at last, a solid article from a much respected paper, there can now be a real chance of survival, without the dreaded d4e (for now atleast)

standstill agreements are becoming more and more popular with the banks in this recession, they give the companys a chance to come out of this recession and rebuild their finance's, a good example of standstill agreements, is jjb, they had 3 altogether, first one cost them 8m in fees, but the other 2 cost around 150k each, it gave the company the chance to sell its gyms and get the cva through the landlords, this then saved the company, the share price of jjb, is now almost 20 x its christmas sp, and the future is bright.

cattles will still have a cloud hanging over its head, whilst its in the standstill agreement timescale, but shares will be unsuspended and company re-lending, so will be regenerating funds again. and the share price will factor the new news into the price. and its not going to be 6.88

this is as i saw the situation at the beginning of the month, and i still believe in it myself.

the accounts can be signed off (with a warning attached), and the beginning of july is looking good for all of us exhausted shareholders.

d4e scenerio, is now fading, and all the posters that favoured this cause, may now have some reservations at the very least!.

john

[tom111] 21/6/2009 21:18

Seemingly good news from ft.com CATTLES are in the final throes of a standstill agreement-any comments?

[startrekker] 19/6/2009 18:41

jab, still holding cheap as chips BT, I was going to sell on results but they fell, so held on. Due a re-rating!

[rodeogirl] 18/6/2009 14:53

Badhshah

You have contributed some very good points on this bb, and I like you await the next RNS.

Hopefully they will release one soon, although I don't expect it will be the final tell all one that we want.

I like you and others remain optimistic about cattles future, I have no concrete reasoning behind it, just instinct like wooly62.

Come on cattles do the decent thing and inform your loyal shareholders what the present situation is or at least a snipit of hope that things are progressing positively.

rg

[wooly62] 18/6/2009 11:01

Thanks RG. I am one of the posters who has thought 90%+ or even more was possible, but I'm moving away from that position. There's no basis for my shift other than instinct, which is a very special quality and (if you believe what that wally Lorraine said) could have got me the job as Sir Alan's apprentice - if only I'd had a few months to waste completing the job interview from hell..... LOL.

[rodeogirl] 18/6/2009 10:20

Wooley

Thanks for the reply. To be truthfull, I didn't really think 3 was a viable possibility either, just put it in for arguments sake.

I agree with your reply and I do think there will have to be a percentage of d4e, however, I don't think it is going to be any where need the 90-95% being banded around by some posters.

However, we all have our own thoughts on how this will play out, and really nothing can be dismissed out of hand until we have an update and some real figures/information to work on.

rg

[badhshah] 18/6/2009 09:41

Let's hope the copany is cash solvent. Since the suspension I have read many informative posts covering all type of possibilties. My conclusion is that administration is bad for all stake holders but if the business is very bad then that could still be a possibility. But people like JR50 who think that company is still cash solvent, their optimism is backed by the company's own statement on 01/04/2009 that the they collected net cash during first quarter of this year. I just hope that company will come out good from this mess, and now waiting for a RNS.

[wooly62] 18/6/2009 08:10

RodeoGirl - yes the auditors could sign off the accounts if the banks only committed to a 3 month facility, but they'd have to give them a going concern qualification saying that the company were dependent upon the continuing support of their bankers.

In your scenarios, I don't see any merit in 3. A pre-pack is used where a company wants to avoid certain obligations and has the resources to trade once it's dumped those. CTT is a very cash hungry business that will always need masses of debt. I can't see anybody setting up a phoenix as it would need the banks support and as they are almost the only creditor there are really no other liabilities worth walking away from - so the banks would be more likely to put in an Administrative Receiver than allow a pre-pack Administration. I would have thought D4E would be more sensible for them if there's a potentially viable business as it gives them control and the ability to gain upside on their shareholding at a later date. The continuance of business a D4E would facilitate would result in better collections from the loan book, stability and hope for the future for the banks and staff - but (probably) not a lot for existing shareholders. Short term collapse in share price is largely irrelevant, it's what the shares are worth when they sell them that will determine the banks recovery - and don't forget they'll be off-setting incoming payments against the part fo their debt that they haven't exchanced for equity, so adding the 2 together could give them a total recovery.

Badhshah - Your understanding re bonds is consistent with mine. I believe the only creditor they rank ahead of is shareholders.

[badhshah] 18/6/2009 01:31

I talked to a bond investor yesterday and asked him few questions about bonds investing.

One of the questions was, 'if a company can't pay the bond debt because it has't got cash but it is cash flow solvent'? His answer was that most likely the bond debt will be rolled over and the interest rate will be reduced (not increased as a penality). He said he can't remember when he had to convert a bond debt of a troubled company into equity. But he said in a worst case, if the company is really performing badly and can't pay interest on the bond debt even at the reduced rate, then as a last resort the bond debt will be swapped with the equity rather than losing the whole lot by letting the company go into administration.

Another thing he said that if a company also has banks' debt then incase of administration, banks always have priority over bond holders on a company's assets.

[rodeogirl] 17/6/2009 23:37

The way I understand the situation so far:

Possible negative outcomes:

1. Administration
2. Large % D4E
3. Pre pack

Reasons against the above:

1. No win situation for all parties
2. Shareholders lose
3. All lose (Although I think sometimes the bank loan goes with it (maybe someone knows about this and can clarify)

What I don't understand is, if any of the above options are chosen, then surely the banks & bondholders etc will still lose.

If they choose d4e then market capitalisation will drop, and who will want to invest in this company in the near future?

If however, they can find a solution to roll over the debt and show that the company has made massive changes in operation and streamlining, then I would have thought this would be the better option.

Yes to begin with after suspension is lifted, there would be a massive sell off, as all those that could realise something from this mess would. However, I still think if the banks showed faith and cattles showed it was well on the way to putting it's house in order, then new investors would come in as well as some old ones hoping to average down, daytrade etc.

If the recently mentioned 3-month trial was true, then this could be a way forward with the banks extending any positive agreement.

However, if indeed this could be the way to go, would/could the auditor's sign of the accounts if say the bank was going to review the situation again in 3 months.

Or will we be kept waiting and guessing till after such a trial before finding out?

I know this is a very simplistic way off looking at the situation, and of course I am not quoting any figures (because I don't really understand them and they are not accurate anyway).

rg

[jr50] 17/6/2009 22:01

spectoacc

you are very correct, and the example you have given is probably the most similiar in debt convenants area and d4e

but you have ignored the scenerio of this recession, it cannot be compared to another due to the impact on the banks,

the rule book and past examples im afraid are out on this one....imho

you are a very sensible poster, and your views are very highly respected. but as any other poster on this board, you have a small area of doubt on your prognosis of the situation,

lets hope im right and your wrong........a result we would both welcome.

john

[spectoacc] 17/6/2009 20:59

Startrekker - same is true of all the other many co's who've had large D4E's, & it's always the same - "Vote this through or it's administration, take your pick". Marconi sticks in the mind as one with very many small shareholders that still went through.

[jab118] 17/6/2009 17:15

startdust.... are you still holding those cheap as chips BT's..?

[startrekker] 17/6/2009 16:58

As the share is suspended and I can't be accused of ramping, I believe that theres life in CTT but not as we know it. A 99% D4E would not be voted through even if it was proposed. If CTT has a future it has a future! It doesn't have to be dependent on CTT holders bending over and soaping their backsides.

I can't see current holders giving up more than 75%. As a matter of principle most holders would vote against it as it would be tantamount to Theft.