Provident Financial PLC (LON:PFG) is going ahead with its scheme of arrangement plans after the Financial Conduct Authority (FCA) said it would not go to court to oppose the scheme.
Provident Financial wants to cap the mis-selling liabilities facing its consumer credit arm, which it claims threaten the survival of the whole business.
In a letter, the FCA said it does not support the scheme, which it said was “inconsistent with the FCA's rules, principles and objectives”.
In this instance, however, the FCA said "the only likely alternative to a scheme is the insolvency of Provident Personal Credit Limited (PPC)".
As Provident was closing its consumer credit operation, there was no unfair benefit to shareholders at the expense of creditors added the FCA
It was that objection that prompted the regulator to go to court in May and block guaranteed loans group Amigo Loans’ attempt to set up a similar scheme.
Malcolm Le May, Provident’s chief executive, said: "Although the FCA has confirmed it does not support the Scheme and has summarised a number of concerns, I am pleased that the FCA has decided not to appear in Court to oppose the sanction of the Scheme.
“PFG believes the confirmation from the FCA that it is not going appear in Court to oppose the sanction of the Scheme is the right decision for CCD's customers.
“Without the scheme, CCD [consumer credit] customers are highly likely to receive no redress payments, as it is highly likely that the CCD subsidiaries would commence insolvency proceedings and would therefore not be in a position to make any compensation payments to customers.”
The scheme requires more than 50% of all creditors by number who vote on the scheme to vote in favour, and the total value of their claims to represent at least 75% of the value of the claims of all creditors who vote, said PFG’s statement.
If creditors approve, the High Court hearing will be on 30 July.
PFG added that since 10 May, when CCD was put into managed run-off, its receivables book has reduced to £42mlm as at the end of June and over 1,000 staff have now left the business.