Launch of Restructuring (9860W)

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RNS Number : 9860W

Cattles PLC

29 November 2010

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION

29 November 2010 FOR IMMEDIATE RELEASE

Cattles plc

Launch of restructuring

The Board of Cattles plc ("Cattles") announces that it has received sufficient support from its key financial creditors to enable it to launch a restructuring of the Cattles group (the "Group").

The highlights of the restructuring proposal are as follows:

-- Cattles and Welcome Financial Services Limited ("WFSL") each intend to propose a scheme of arrangement to certain of their respective creditors;

-- Cattles, WFSL and certain other members of the Group intend to enter into bilateral agreements with the pension trustee of the Cattles Staff Pension Fund which will compromise the claims of the fund;

-- a payment is proposed to be made by WFSL to the Financial Services Compensation Scheme (the "FSCS") in connection with the liabilities of WFSL in respect of certain regulated products sold by WFSL; and

-- Cattles intends to propose a scheme of arrangement to its shareholders, pursuant to which Cattles shareholders will receive 1p in cash for each Cattles share held by them.

Commenting on the proposed restructuring, the Executive Chairman of Cattles, Margaret Young said:

"Today's announcement is the culmination of long and complex discussions and, given the Group's very serious financial difficulties, we believe that the proposed restructuring represents the best possible outcome for the Group's creditors and shareholders. It will also provide a stable platform to collect out the Welcome Finance loan book and to continue to develop the businesses of Shopacheck and The Lewis Group. Since the beginning of 2009, we have collected over GBP1.1 billion from the Welcome Finance loan book and returned Shopacheck and The Lewis Group to profitability.

Cattles and WFSL have received sufficient support from their respective key financial creditors to enable us to launch this restructuring. The proposed schemes of arrangement will be put before separate creditor and shareholder meetings for their approval, early in the New Year. If those approvals are for any reason not forthcoming, the Board of Cattles expects that it would be necessary to place Cattles into administration."

Introduction

The Board of Cattles announces that it has received sufficient support from its key financial creditors to enable it to launch a restructuring of the Group.

On 25 November 2009, Cattles announced that it had agreed a Standstill and Equalisation Agreement ("SEA") with its key financial creditors, and that this should improve the likelihood of achieving its restructuring objectives. Since that date, Cattles has continued to engage in discussions with representatives of its key financial creditors in order to progress proposals for a solvent restructuring.

Cattles, WFSL and certain other members of the Group have today entered into an agreement with certain of their respective key financial creditors to support a solvent restructuring (the "Restructuring and Lock-Up Agreement"). Cattles and WFSL have now notified the other parties to the Restructuring and Lock-Up Agreement that they have resolved to launch a solvent restructuring of the Group as described below.

Key features of the restructuring

- Cattles intends to propose a scheme of arrangement under Part 26 of the Companies Act 2006 to its shareholders, pursuant to which the shares in Cattles will be acquired by Bovess Limited ("Bovess"). Bovess is a newly incorporated company, established at the request of Cattles by an independent corporate services provider for the purposes of implementing the restructuring. Bovess will be managed by the independent corporate services provider and ultimately owned by a charitable trust. Under the terms of the Cattles shareholder scheme, Cattles shareholders will receive 1p in cash for each Cattles share held by them. The formal Rule 2.5 announcement, as required by the City Code on Takeovers and Mergers, will be issued shortly.

- Cattles and WFSL also each intend to propose a scheme of arrangement to certain of their respective creditors. Pursuant to those schemes, the claims of those creditors will be compromised in order to facilitate a solvent restructuring of Cattles and WFSL and maximise recoveries for their respective creditors.

- Another member of the Group, Ewbanks Mail Order Limited, intends to propose a scheme of arrangement to certain of its creditors, pursuant to which its guarantee obligations (and those of certain other members of the Group) will be compromised in order to facilitate a solvent restructuring of those entities.

- Further, Cattles, WFSL and certain other members of the Group intend to enter into bilateral agreements with certain other creditors including the pension trustee of the Cattles Staff Pension Fund which will compromise the claims of the fund in order to facilitate the solvent restructuring. In addition, a payment of GBP90 million (subject to certain adjustments) is proposed to be made by WFSL to the FSCS in connection with the liabilities of WFSL in respect of certain regulated products sold by WFSL.

- Each scheme and bilateral agreement, including the shareholders' scheme, will be subject to the satisfaction of certain conditions.

- Subject to the satisfaction of those conditions, under the terms of the WFSL scheme of arrangement, Cattles will compromise its subordinated intercompany claims against WFSL and other subsidiaries in the Group in return for a payment by WFSL of GBP49 million to Cattles.

As a condition of that payment of GBP49 million, WFSL and Cattles will enter into a protocol for the sharing of information relating to any claims either may have against third parties. For joint claims against third parties by both WFSL and Cattles, in the event of a proposed settlement or appeal, WFSL would be able to decide whether or not to proceed subject to it indemnifying Cattles for any losses it might suffer as a result.

Having stabilised the Group and launched the restructuring, Margaret Young, David Haxby, Frank Dee and Alan McWalter have advised the Board of their intention to resign as directors of Cattles, at an appropriate time, shortly after the restructuring has been completed. Robert East and Paul Felton-Smith will remain as Managing Director and Finance Director, respectively.

Position of Cattles

If the Cattles creditor scheme and/or the Cattles shareholder scheme do not become effective, the Board of Cattles expects that it will be necessary to place Cattles into administration and that all of its subsidiaries (other than Cattles Staff Pension Fund Limited) will be sold to Bovess for a nominal payment to Cattles (with no offer to Cattles' shareholders). Pursuant to the Restructuring and Lock-Up Agreement, certain of the key financial creditors of Cattles and WFSL have confirmed their support for the Cattles Board to place Cattles into administration in such circumstances.

In that scenario, under the terms of the WFSL creditor scheme, Cattles will agree to compromise its subordinated intercompany claims against WFSL and other subsidiaries in the Group for an amount which is not less than GBP30 million and which may increase, at the option of Cattles, either to: (i) GBP33 million; or (ii) subject to a ratchet mechanism, an amount which may not exceed GBP39 million. This reflects the lower amount WFSL is prepared to pay to compromise its intercompany debt in circumstances where Cattles is in administration.

Therefore, the assets available for distribution to the creditors of Cattles under the restructuring will comprise:

(a) either: (i) up to GBP39 million; or (ii) GBP49 million paid by WFSL, as summarised above;

(b) approximately GBP5 million projected to be received from the intended future disposal of a property owned by Cattles Properties (Ruddington) Limited, which is currently occupied by WFSL;

(c) approximately GBP2 million in cash held by Cattles; and

(d) the proceeds of any successful claims that Cattles may have against third parties,

in each case subject to related costs incurred.

Expected timetable

Documentation relating to the Cattles shareholder scheme and the creditor schemes described above is expected to be made available in December 2010 to the shareholders of Cattles and the relevant creditors of Cattles and WFSL, respectively. This documentation will include details of the timetable for the schemes, including the proposed dates for meetings in 2011 at which those shareholders or creditors (as applicable) will be able to attend and vote in respect of the schemes.

Subject to the satisfaction of the conditions to be set out in the creditor schemes, the Cattles shareholder scheme and the bilateral agreements, it is presently expected that this restructuring process will be concluded by late February 2011.

Cattles will make further announcements in connection with the matters set out above, as appropriate.

A copy of this announcement will also be made available on Cattles' website (www.cattles.co.uk) by no later than 12.00 noon (London time) on 30 November 2010.

For further information:

Margaret Young, Executive Chairman, Cattles plc 020 7269 7252

Paul Marriott, Financial Dynamics

This information is provided by RNS

The company news service from the London Stock Exchange

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