Cattles has hired a restructuring expert to serve as interim
FD while former acting FD Robert East leads crucial finance renegotiations with
its debt providers. The company has suspended its shares because it will fail to
file its 2008 accounts on time, as talks continue.
Jamie Smith, a partner in Deloitte’s transaction and reorganisation business
until 2006, whose experience focuses on scheme administrations of insurance
firms and advising lenders to insurance entities on restructuring and financing,
will start work as soon as his appointment is approved by the Financial Services
Authority. A spokesperson for Cattles says that, while this can take up to three
months, it expects Smith will be approved.
Though Cattles is not an FSA-regulated company, its primary lending division,
Welcome Financial Services, is.
Smith takes over from East, acting FD since early March when incumbent FD
James Corr was suspended from duties. East has become “heavily involved” in
helping CEO David Postings lead discussions with Cattles’ banks to negotiate
waivers on banking covenants which were breached that month and is now fully
focused on this, Cattles says.
Cattles suspended its shares on 23 April because it cannot publish its 2008
accounts in time for the 30 April deadline while its finance position remains
unclear. The company’s external auditor, Deloitte, says it may have to find
£850m to cover losses on its loans and a further £150m for incurred, but not
reported, impairments covering claims that have already happened, but were not
reported to the company’s insurers at the time the balance sheet was calculated.
Deloitte and lawyers Freshfields Bruckhaus Deringer are helping Cattles’s audit
committee conduct a review of its impairment provision policies and has found
evidence of those being applied incorrectly.
East joined Cattles from Barclays last summer to set up its retail banking
business, an idea which was effectively shelved this January when it dropped its
application to the FSA for a banking licence because of concerns over its debt
facilities. He was then to succeed James Corr as group FD and join the board on
Corr’s retirement in February.
His appointment to the board was held back, but East started the job that
month when it was announced that Corr would remain in post to see through the
impairment provision review, but was signed off sick.
Shortly after, Corr became one of six senior managers and one of two FDs
suspended by Cattles after clearer evidence of a “breakdown in internal
controls” emerged. But, instead of appointing East to the board as FD proper,
restructuring expert Smith’s appointment as interim FD came three weeks later.
The review of Cattles’s use of impairment policies is ongoing. “For the
breakdown in internal controls to have occurred, and for the extent of
provisioning to have remained unrecognised despite specific and repeated
questioning by members of the board as part of its monitoring of the group’s
credit risk position the board believes that the board as a whole received
inaccurate and/or incomplete information,” Cattles says.
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