NSF.L Regulatory News (NSF)

Non-Standard Finance plc

('Non-Standard Finance', 'NSF', the 'Company' or the 'Group')

Update on Current Status and Regulatory matters

28 September 2022

· This update provides a summary of the current status of the Group. More detailed information is provided in the Unaudited Half Year Results to 30 June 2022 announcement which is also published today.

· Despite promising operational performance, the Group continues to be loss making, and for the March 2022 and June 2022 quarter end covenant tests, the loan to value ratio was higher than the level permitted under the covenant. The Group, through negotiations with its lenders, has obtained a short-term waiver which means the loan to value covenant will not be formally tested, and therefore no covenant breach or event of default will arise, until the Group provides its compliance certificates for the March 2022 and June 2022 quarter dates. The date on which the Group is required to supply these compliance certificates has been extended until 5 October 2022, with a mechanism for this date to be extended further with lender support.

· In order to remedy the situation, a capital raise (the 'Capital Raise') is needed. To enable a Capital Raise, certainty is needed as to the extent of redress liabilities. The Directors have therefore decided to pursue the use of a court-based process (the 'Process'), such as a scheme of arrangement or restructuring plan, in relation to its redress liabilities. A successful Process will allow the Group to proceed with its planned capital raise. If successful, the proceeds of the Capital Raise will be used to fund a cash pot which will be available to finance the payment of redress liabilities to affected customers and to strengthen the Group's balance sheet and underpin future growth. Prior to the Capital Raise, further short-term waivers from lenders will be required and are likely to be dependent on positive progress of the Process.

· Although it is not expected that the Process will provide for redress claims to be paid in full, the Directors believe that the Process is in the best interests of customers with redress claims. Without the Process, the Directors believe a Capital Raise would not be successful and therefore insolvency is the most likely outcome, in which there would likely be no payment of redress liabilities.

· A key objective of the Process will be to treat all affected customers equally. Although the independent review of the Group's branch-based lending division carried out in 2021 identified no systemic issues requiring redress, as the branch-based and guarantor loans divisions both trade out of the same legal entity, the Process will encompass potential claims from both divisions in order to ensure equitable treatment of customers.

· The Group is actively engaged with the FCA, the FOS, as well as Alchemy and the Group's lenders, regarding the Process. It has appointed an independent chairperson to chair a committee of customers with redress claims, who will review the terms of the Process on behalf of affected customers.

· Further details of the Process will be announced in due course. The Process will be subject to satisfying the statutory creditor approval requirements and the sanction of the Court.

· We are engaging with the FCA with respect to the business' plan to rely on DISP 1.6.2R(2), pursuant to which, Everyday Loans is entitled to place a temporary hold on the processing of customer complaints.

· Plans for the Capital Raise remain subject to successful completion of the Process and the continued support of Alchemy and other key shareholders as well as the Group's lenders.

· Without the successful completion of the Capital Raise, the Group remains balance sheet insolvent and the Group's ability to remain a going concern is subject to material uncertainties. However, the Directors continue to believe there is a reasonable prospect of resolving this position through the Process and the Capital Raise.

· The Directors of NSF plc are working with key stakeholders on an alternative transaction to be implemented if the Process is successful, but the ensuing Capital Raise is unsuccessful which would preserve the branch-based lending business as a going concern. In this scenario, it is expected that the same cash pot would be available to finance the payment of redress liabilities as if the Capital Raise had completed. However, there would be a material risk of the Company and certain other members of the Group entering insolvency and as a result there would be no recovery for the Company's shareholders. 

28 September 2022

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