Disposal

RNS Number:8705N
Debtmatters Group PLC
12 February 2008


12 February 2008

             Debtmatters Group plc ("Debtmatters" or the "Company")

              Disposal of the IVA Book and of Debtmatters Limited
                     Change of name to Loanmakers Group plc


  * The Company has completed its strategic review and, subject to shareholder
    approval, plans to dispose of its IVA and debt resolution business.
    Accordingly the Company confirms that it is no longer in a bid period.

  * The Company's proposed new focus will be on its established loan broking
    division, which has grown profitably to date and is trading in line with
    expectations as previously announced.

  * A Circular to Shareholders has been posted recommending the following
    proposals:

    * The disposal of the Company's IVA Book for a consideration of £6.4 million 
      to a consortium comprising of Grant Thornton UK LLP and Totemic Limited.

    * The sale of the residual Debtmatters Limited business to Creditflex
      Group Limited for a consideration of £800,000.

    * Proposed name change to Loanmakers Group plc to reflect new focus.
           
  * All monies raised from the disposals will be used to significantly
    reduce the Company's borrowings.


Ges Ratcliffe, Debtmatters CEO commented:

"It was becoming increasingly difficult to operate a successful direct marketing
IVA business with acceptable profit margins in the face of increasing costs of
case acquisition and reduced fee levels in tandem with ongoing sector
uncertainty.



As a result of a detailed review, the Board has concluded that the best long
term strategy would be to exit the IVA sector completely and focus on
Loanmakers, the profitable loan broking part of the business, which was acquired
in June 2006.  This business has performed well to date and has the potential to
deliver good growth.  It also enjoys established relationships with lenders and
will be supported by the recent securing of £3.5m of banking facilities, which
will underpin its business.

Good prospects exist for Loanmakers but visibility is limited due to the range
of challenges and uncertainties that exist currently in the financial markets."


For further information please contact:

Ges Ratcliffe                         CEO, Debtmatters Group plc                         01204 845 700
Mark Prideaux                         Finance Director, Debtmatters Group plc

Rick Thompson / Carl Holmes           Charles Stanley Securities                         020 7149 6000
                                      Nominated Adviser and Broker

Shane Dolan                           Biddicks                                           020 7448 1000


The Company has posted a circular to Shareholders containing proposals to
dispose of the IVA Book for a consideration of £6.4 million to a consortium
comprised of Grant Thornton LLP and Totemic Limited. In addition, the Company
announces the disposal of the residual business of Debtmatters Limited for a
consideration of £800,000 to Creditflex Group Limited ("Creditflex"), a company
wholly owned by Ges Ratcliffe. The Company also announces that it proposes to
change its name to Loanmakers Group plc.

A General Meeting has been convened to seek Shareholder approval of the two
proposed disposals as well as the change of company name at 10.30 a.m. on 6
March 2008 at the offices of Halliwells LLP, 3 Hardman Square, Manchester M3
3EB.

Reasons for and details of the two disposals and use of proceeds

The Company announced in October 2007 that in light of the impact of certain
modifications to its core IVA business and given the continued disappointing
share price, the Board was to undertake a full strategic review of the business.
Accordingly, the Board has concluded that it should dispose of the entire
Group's IVA and debt resolution related activities, and focus the Group around
the Loanmakers business. Accordingly, the Board proposes to change the name of
the Group to Loanmakers Group plc.

The Board has entered into agreements in identical form for the sale of the IVA
Book for £6.4 million in aggregate to a consortium comprising of Grant Thornton
UK LLP and Totemic Limited. In addition, in order to focus on Loanmakers, the
Board has agreed to dispose of the remaining business of Debtmatters Limited to
Creditflex, a company wholly owned by Ges Ratcliffe for £800,000 and which Mark
Prideaux, the Group Finance Director will manage.  Following the disposal of
Debtmatters it is intended that Mark Prideaux will leave the Group.  The
consideration for both disposals will be satisfied in cash which will be used to
reduce group indebtedness.

The disposal of the IVA Book has meant that the Company has had to undertake a
major redundancy programme which has been completed as the IVA side of the
Debtmatters business employed 138 out of a total of 304 employees. A total of 87
employees have been made redundant, and a further 97 employees will leave the
Group upon the sale of Debtmatters to Creditflex.

The sale of the IVA Book is deemed to be a disposal resulting in a fundamental
change of business for the purpose of AIM Rule 15 and therefore is subject to
Shareholder approval.

The sale of Debtmatters is deemed to be a related party transaction for the
purpose of AIM Rule 13, by virtue of Ges Ratcliffe being a director of the Group
and the owner of Creditflex and Mark Prideaux's intended involvement in managing
Debtmatters Limited. The sale of Debtmatters is also deemed to be a substantial
property transaction for the purposes of section 190 of the Companies Act,
thereby requiring Shareholder approval.

The Directors have convened a General Meeting for 10.30 a.m. on 6 March 2008, at
which Shareholders will be asked to consider, and if thought fit, approve the
Resolutions in order to implement the Proposals.


Background to and reasons for the Proposals

2007 was a disappointing year for the Group and the difficulties in the IVA
sector have resulted in a significant reduction in approved IVA case volumes.
Having reached a peak of over 600 cases a month one year ago, the recent IVA
monthly run rate is now in the region of 50 cases. The difficulties in the IVA
sector are well documented and principally stem from an increase in costs of
case acquisition and reduced fee levels, which have both combined to create a
challenging environment in which to operate a successful direct marketing IVA
business with acceptable profit margins. The discussions hosted by the British
Bankers Association and the Insolvency Service to discuss amongst other things
the issue of fees charged by insolvency practitioners proved inconclusive on
this specific issue which has led to continued uncertainty across the industry
and continued pressure on share prices in the sector. The Board therefore
concluded that the Group should exit completely from the IVA sector in order to
focus on the loan broking part of the business.


Disposal of the IVA Book

As part of the strategic review the Board asked Charles Stanley, the Company's
Nominated Adviser, to conduct a formal auction process with the aim of
identifying a preferred potential offeror for the IVA business as a whole or the
IVA Book. The auction process ran through to January of this year.

At the conclusion of this process, the Directors, advised by Charles Stanley,
unanimously decided the bid proposal received from the Consortium provided the
highest and best offer for Shareholders and which has been conditionally
accepted by the Board.

Under the terms of the IVA Sale Agreements, which are conditional, inter alia,
upon the passing of Resolution 1 by Shareholders and the court approval of the
cases being transferred to new Insolvency Practitioners, Debtmatters will
dispose of the IVA Book to the Consortium for the agreed price of £6.4 million,
payable in cash which will be utilised to reduce the Group's current bank
borrowings of approximately £10 million at the date of completion.

The sale of the IVA Book is deemed to be a disposal resulting in a fundamental
change of business for the purpose of AIM Rule 15 as the disposal proceeds are
in excess of the market capitalisation of the Company as at 11 February 2008. By
virtue of being deemed to be a fundamental change of business the disposal is
conditional on consent from Shareholders.


Detailed summary of IVA Sale Agreement

As stated above Debtmatters has entered into two identical conditional sale
agreements with each of Grant Thornton UK LLP and Totemic Limited, the
Consortium, for the sale of IVA Book. Under the terms of the agreements
Debtmatters has agreed to sell its IVA Book to the buyer for an aggregate total
consideration of £6.4 million payable in cash of which £640,000 has been paid by
way of deposit and the balance is payable on completion of the agreements.

Completion is conditional upon (1) the High Court of Justice (or other court of
higher authority) of England and Wales granting an order for the block transfer
of the appointments of the Company's officers as nominees or supervisors of the
IVAs constituting the IVA Book to the buyer's nominated appointee and (2) the
shareholders of the Company approving the sale of the IVA Book for the purposes
of AIM Rule 15 at the General Meeting.

Following completion Debtmatters will remain responsible for the employees
engaged in the business at completion and has agreed to give an indemnity to the
buyer in respect of any potential liability which may arise as a result of the
Transfer of Undertakings (Protection of Employment) Regulations 2006 applying to
the transaction.

Certain limited warranties relating to the conduct of the IVA Book have been
given by Debtmatters subject to a minimum threshold of £320,000.


Disposal of Debtmatters Limited

The Board has agreed, subject to Shareholder approval, to dispose of Debtmatters
which comprises the residual domestic IVA business, the commercial insolvency
practice and the nascent debt management business (a start up operation of the
Group during the seven months to October 2007) for £800,000 payable in cash to
Creditflex, a company wholly owned by Ges Ratcliffe. This disposal will
facilitate the final move away from the IVA related sector following the
disposal of the IVA Book and the redundancy programme which has been completed.

The main body of Debtmatters' residual business relates to corporate insolvency
work which is generated almost exclusively through the contacts and personal
relationships of the management team. A third party purchaser of the business
would be unlikely to obtain recurring income from that business without the
ongoing employment of the existing work winning individuals. The value of the
business to a third party would therefore be restricted to the value of the work
in progress. For this reason an auction process has not been undertaken for this
particular disposal. However, Baker Tilly Corporate Finance LLP has prepared a
valuation of Debtmatters following the disposal of the IVA Book. The result of
the valuation is broadly consistent with  the offer by Creditflex for
Debtmatters. The offer by Creditflex is also in excess of the value of the
recoverable work in progress.

The trading position of the Debtmatters business has remained disappointing,
with the division continuing to incur trading losses, which have resulted from a
reduction in income levels and margins. It is anticipated that working capital
in excess of £1 million would be required to be injected in the Debtmatters
business in the near term following its disposal to Creditflex.

The financial information on Debtmatters derived from the Interim results for
the six months ended 30 September 2007, released on the 21 December 2007 is as
follows:

                                           Unaudited                 Unaudited                Year ended
                                      6 months ended            6 months ended             31 March 2007
                                   30 September 2007         30 September 2006                (Restated)
                                                                    (Restated)
                                               £'000                     £'000                     £'000

Revenue                                    5,080,466                 9,476,616                18,062,550
EBITDA                                     (860,904)                 3,874,265                 6,319,098


The value of Debtmatters's adjusted net assets following the sale of the IVA
book to the Consortium is approximately £1.4 million.

In light of the above outlined results and the general trend in the IVA sector
the Independent Director believes that disposing of the remaining business
within Debtmatters will give the Company as a whole the flexibility and
resources to maximise the potential of the remaining part of the Company, being
the Loanmakers business.

The proceeds of the sale of Debtmatters will also be employed to reduce the
Group's borrowings.

As Ges Ratcliffe is Chief Executive and a Director of the Company and will be
interested in the acquisition of Debtmatters by virtue of wholly owning
Creditflex and Mark Prideaux, Finance Director of the Company also being
interested in the acquisition, as he is leaving the Group to manage Debtmatters,
the disposal of Debtmatters will be a related party transaction for the purposes
of AIM Rule 13. The sale of Debtmatters will also be deemed to be a substantial
property transaction for the purposes of section 190 of the Companies Act as the
transaction is for a non-cash asset of a value in excess of £100,000 and
therefore requires Shareholder approval.

Mr. Ratcliffe has a beneficial interest in 10,070,645 Ordinary Shares
representing 32.41 per cent. of the issued share capital of the Company. As a
consequence of his shareholding in the Company, Mr. Ratcliffe has undertaken to
abstain from voting on Resolution 2.

Furthermore, Mr. Prideaux has a beneficial interest in 45,620 Ordinary Shares
representing 0.15 per cent. of the issued share capital of the Company. As a
consequence of his shareholding in the Company, Mr. Prideaux has undertaken to
abstain from voting on Resolution 2.

The Independent Director, who is independent for the purposes of the AIM Rules,
having consulted with Charles Stanley, the Company's Nominated Adviser,
considers the terms of the disposal of Debtmatters to be fair and reasonable
insofar as the Company's Shareholders are concerned.


Detailed summary of Debtmatters Sale Agreement

The Company has entered into an agreement with Creditflex Group Limited for the
sale to it of the entire issued share capital of Debtmatters in consideration of
the payment of £800,000 in cash on completion.

The Debtmatters Sale Agreement is conditional upon (1) the passing of a
resolution by the shareholders of the Company for the purpose of section 190 of
the Companies Act 2006 at the General Meeting and (2) completion of the IVA Sale
Agreement.

No warranties are being given by the Company save as to its capacity to enter
into the agreement and title to the shares in Debtmatters.

Following completion the Company has agreed to give an indemnity to Creditflex
in respect of any potential liability which Creditflex or Debtmatters may incur
directly as a result of the Company entering into the IVA Sale Agreement and the
performance by Debtmatters and/or Creditflex of its obligations under the IVA
Sale Agreement and any liability for Corporation Tax of Debtmatters accruing by
reference to a period occurring prior to completion.


Remaining business of the Company

The loan broking subsidiary, acquired in June 2006, has performed well, as
stated in the pre close period update on 1 October 2007, and has been growing in
line with the Board's expectations. It was due to Loanmakers that the Group
continued to be profitable at the half year. As reported in the interim results
for the six months ended 30 September 2007, turnover from Loanmakers was £9.23
million (2006: £4.31 million for the 3 1/2 month period to September 2006.) and
contributed £1.63 million of EBITDA. By contrast, turnover for Debtmatters fell
by 46 per cent. to £5.08 million (2006: £9.48 million) and incurred a loss of
£0.86 million in the same period.

Steady growth is anticipated and relationships with lenders remain strong. The
Board are pleased to announce that new banking facilities have been agreed of
£3.5 million for the Group. However, the current 'credit crunch', tighter
lending standards and general uncertainty in the financial markets may have an
impact on Loanmakers in 2008.


Change of Name

In order to clearly move away from association with the IVA sector and to
refocus the business on loan broking the Board feels that in addition to the
proposed disposals of the IVA Book and Debtmatters it should change its name
from Debtmatters Group plc to Loanmakers Group plc, which will be the focus of
the Group going forward, as the name of Debtmatters will always be associated
with the IVA sector.


Management composition

Ges Ratcliffe will remain as full time Chief Executive Officer of the Company
and as such will have no involvement as an Insolvency Practitioner on any new
appointments in the ongoing business of Debtmatters. His role in Creditflex will
be limited to that of investor and non-executive director. Mark Prideaux will
step down as Finance Director of the Company with the intention of focusing on
the management of Debtmatters. He will remain with the Company for an interim
period to ensure a smooth handover to a successor.


Future prospects of the Company

The Group has for a time been operating in two contrasting markets with both
economic uncertainty and negative market sentiment continuing to depress the
debt resolution market and in particular the IVA sector while the loan broking
business has grown in line with expectations even under the current
circumstances of the 'credit crunch', tightening credit criteria and general
well publicised negative sentiment. Your Board is therefore of the view that the
time is now right to continue to build on the prospects that Loanmakers has
displayed while at the same time moving away from the debt resolution market by
disposing of all IVA related activities thereby enabling the management to focus
on growing the more profitable part of the business Loanmakers.

Copies of the circular sent to shareholders will be available at the offices of
Charles Stanley Securities at 25 Luke Street, London EC2A 4AR and will be also
be available to download on the Company's website.


                                  DEFINITIONS


The following definitions apply throughout this document unless the context
requires otherwise:

"AIM"                             the AIM market of the London Stock Exchange plc

"AIM Rules"                       the rules for AIM companies and their nominated advisers, as issued by
                                  the London Stock Exchange, as amended from time to time

"Charles Stanley"                 Charles Stanley Securities, a trading division of Charles Stanley & Co.
                                  Limited, the Company's Nominated Adviser and Broker regulated by the
                                  Financial Services Authority

"Companies Act"                   the Companies Act 1985, as amended or repeated by the Companies Act
                                  2006 from time to time

"Company" or "Group"              Debtmatters Group plc

"Consideration for the IVA Book"  the consideration to be provided to Debtmatters by the Consortium under
                                  the IVA Sale Agreements

"Consortium"                      Grant Thornton UK LLP and Totemic Limited

"Consideration for Debtmatters"   the consideration to be provided to Debtmatters by Creditflex Group
                                  Limited under the Debtmatters Sale Agreement

"Creditflex"                      Creditflex Group Limited, a company wholly owned by Ges Ratcliffe

"Debtmatters"                     Debtmatters Limited, a subsidiary of Debtmatters Group plc

"Debtmatters Sale Agreement"      the conditional agreement dated 8 February 2008 between (1) Creditflex,
                                  being a company which is owned by Ges Ratcliffe, and (2) the Company
                                  for the sale and purchase of the entire issued share capital of
                                  Debtmatters Limited.

"Directors" or the "Board"        the directors of the Company

" General Meeting"                the  General Meeting of the Company convened for 10.30 a.m. on 6 March
                                  2008 by the Notice of General Meeting and any adjournment thereof

"Form of Proxy"                   the form of proxy accompanying this document for use at the General
                                  Meeting

"Independent Director"            Noel Guilford

"IVA"                             Individual Voluntary Arrangement

"IVA Book"                        all the current IVA engagements of Debtmatters including the benefit of
                                  the IVAs and all partly performed services allocated to such IVAs in
                                  respect of which nominees fees, supervisor fees and disbursements are
                                  receivable by Debtmatters

"IVA Sale Agreement"              the conditional sale agreements each in identical form dated 8 February
                                  2008 between Debtmatters and each of Grant Thornton and Totemic Limited
                                  for the sale and purchase of the IVA Book

"Loanmakers"                      Loanmakers Limited, a subsidiary of the Company

"Notice of General Meeting"       the notice of General Meeting set out at the end of the circular sent
                                  to Shareholders

"Ordinary Shares"                 ordinary shares of 10 pence each in the share capital of the Company

"Proposals"                       together the disposal of the IVA Book and Debtmatters

"Resolutions"                     the resolutions set out in the Notice of General Meeting

"Shareholders"                    holders of Ordinary Shares in the Company




                      This information is provided by RNS
            The company news service from the London Stock Exchange
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