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November 29, 2007 |
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PARAGON GROUP: Selling Off Loan Assets to Avert Rights Issue Paragon Group of Companies plc is considering the sale of a GBP140 million portfolio of car loans in an attempt to ward off an emergency rights issue, the Daily Telegraph says. According to the report, the disposals, which could include a GBP60 million portfolio of unsecured loans and a GBP60 million book of hire purchase lending agreements, may not provide enough cash. However, it is thought that they could help Paragon to renegotiate terms with its lending banks, Iain Dey writes for the Daily Telegraph. Emergency Rights Issue As previously disclosed, Paragon has entered into a standby underwriting agreement with UBS AG, supported by a group of institutional shareholders. This agreement provides Paragon the ability to launch an underwritten rights issue for up to GB280 million until Feb. 27, 2008, unless satisfactory alternative funding arrangements have been put in place prior to that time. Going Concern Doubt The obligation of UBS is subject to normal conditions, including: -- all relevant approvals for the rights issue, including shareholder approval, being obtained; -- the absence of any material adverse change affecting the Group; and -- the absence of any force majeure event. Such conditionality gives rise to a material uncertainty related to events or conditions which may cast significant doubt on the Group's ability to continue as a going concern and, therefore it may, if it is unable to satisfy these conditions and in the absence of other funding alternatives, be unable to realize its assets and discharge its liabilities in the normal course of business. Paragon, on the other hand, told the Daily Telegraph it will not need to use the facility as it hopes to reach a suitable agreement with its lending banks. Current Funding and Environment The group's lending is funded largely by the securitization of loan assets, accounting for GBP9.9 billion of the group's liabilities at Sept. 30, 2007. New lending is financed by a GBP2.3 billion warehouse facility provided by a banking syndicate of which GBP932 million was drawn as at Sept. 30, 2007 (2006: GBP1.1 billion). In addition, a corporate facility of GBP280 million, also provided by a banking syndicate, is used to fund the group's working capital requirements together with a long-term bond issue of GBP120 million due in 2017. The group is not a deposit taker and has no retail depositor base. The group has conducted extensive discussions with its lending banks for the renewal of the corporate facility and extension of the revolving period of the warehouse facility. While terms for renewal have been offered in principle, they are not attractive for a variety of reasons, including the high cost of such facilities in the current market environment and the short-term nature of the terms available. Paragon Group Of Companies PLC -- http://www.paragon-group.co.uk -- is a U.K. specialist buy-to-let and consumer finance lender. |
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