Cattles sacks executives over £700m black hole

Published on Wednesday 1 July 2009 21:15

CATTLES, the owner of the Welcome Finance consumer loans firm, yesterday revealed that it had sacked six senior executives after a probe into accounting irregularities which blew a £700 million hole in the company's balance sheet.

Senior staff including finance director James Corr and chief operating officer Ian Cummine have left following "a breakdown in controls" which resulted in its policies on bad debts being applied incorrectly, the company disclosed.

It is understood this involved deferring and extending repayment terms on under-performing loans to avoid making a loss provision in the accounts.

Cattles uncovered the breakdown in controls in February and warned in April that provisions for 2008 and previous years would be 700m higher than expected.

The six executives have been suspended since March. The Financial Services Authority is understood to have details of the internal probe by Deloitte and Freshfields and to be considering whether to take further action.

Shares in Cattles are suspended after the firm delayed its annual results to resolve the accounting crisis.

The firm is also labouring under looming deadlines on its 2.4 billion debt burden. It must soon make payments to bondholders as well as re-finance 500m in wholesale funding with a bank consortium led by Royal Bank of Scotland by 14 July.

Cattles is pushing for a "standstill agreement" which will see these payments suspended while it resolves its future.

In April it announced it would close its Welcome Car Finance car loans business to conserve cash. It is also considering the sale of its invoice financing arm.

Alongside the six suspended executives who have been sacked, Cattles added that the group's treasury and risk director, Mark Collins, is to leave the company immediately.