Embattled sub-prime lender Provident Financial PLC (LON:PFG) has turned to shareholders to meet its huge losses and a hefty settlement for credit card repayment misdemeanours.
A rights issue, priced at nearly half the share price last night, will raise £300mln net to stabilise the financial position and enable the business to grow again, said Malcolm Le May chief executive.
READ: Provident Financial shares drop on reports of discussions with investors over £500mln rescue rights issue
Vanquis Bank, the group’s credit card arm, is to pay £172.1mln in fines, settlements and other charges relating to its repayment option (ROP) plan, while there were huge losses as well last year in its home credit lending business.
Another of Provident’s subsidiaries, car finance division Moneybarn, meanwhile is facing an estimated bill of £20mln over its lending practices and especially its affordability assessments.
All told, Provident posted a loss of £123mln for 2017, a £367mln swing from the previous year with home credit racking up a deficit of nearly £119mln following a disastrous decision to switch from commission-based agents to an in-house sales team.
That sparked a serious of profit warnings followed by the two regulatory investigations. Even after the Vanquis settlement, the FCA will keep Provident on special watch.
Major shareholders Invesco and Woodford Investment Management, which own around 48% of the shares, have agreed to support the fund raise, which was priced at 315p, a 49% discount to the share price last night.
Le May added: "When I became group CEO, I stated my key objective was to execute a turnaround of the Provident Financial Group. Today we have made progress on that objective by agreeing a settlement with the FCA in relation to its investigation into Vanquis Bank's Repayment Option Plan and we now have a clear view on the estimated cost of the FCA investigation of Moneybarn.
“The Provident Financial Group's businesses of Vanquis Bank, Provident Home Credit, Satsuma, and Moneybarn are all well positioned in their markets, with products that customers value and which operate well throughout the economic cycle. The recovery in Provident Home Credit is on track with collections performance continuing to improve.”