Close followers and proponents of section 123 Insolvency Act 1986 might argue that 'insolvency', like fidelity, is an absolute. This is; you either are, or you are not.
"For example," argued Letwin from the IA86 Forever Group, a little too tetchily, "how much are your assets worth? Right. Give us a number on your liabilities. I see.
You're insolvent."
Such people would, then, rail against Non-Standard Finance bank, a West Yorkshire credit provider, who claimed yesterday (7 June) that its business was "deeply insolvent".
"What is this?" They would protest. "You have travelled down from 'insolvent', gone past 'crikey' and are now 'deeply insolvent'? How is that possible?"
We in the NTI newsroom think that Letwin has a point. However, we would also point out that if you seek a loan from a body unattractively named 'Non-Standard Finance' you are (or, as it happens, were) asking for trouble. What is this? We have tried all of the 'standard' lenders; what's next?
Alchemy, also a little suspicious, but the largest shareholder in Non-Standard Finance, has withdrawn its backing for a recapitalisation plan, the London Stock Exchange were told yesterday. Non-Standard had told its shareholders in March that its recapitalisation plan would effectively reduce their shareholdings to “negligible value” unless they backed the scheme.
Non-Standard now says that though it intends to proceed with a redress scheme to settle £14 million of historical claims, it is more likely that its business will be transferred to secured lenders in return for release of a portion of their secured debt and the provision of a new lending facility.
If not much of the above makes sensed to you, members of and borrowers from Non-Standard, a statement from the board may help a little more. “In the event that the scheme is not sanctioned by the court, or the scheme is sanctioned but the proposed recapitalisation and the alternative transaction both fail, then the group would remain insolvent and the most likely outcome would be a group-wide insolvency (most likely Administration), also resulting in no return for current shareholders.”
So there.
Another space to watch.
