The owner of the Welcome Finance consumer loans firm has sacked six senior bosses after a probe into accounting irregularities which blew a £700 million hole in the company’s balance sheet.
Cattles executives, 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.
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 £700 million higher than expected.
The six bosses have been suspended since March. The Financial Services Authority (FSA) is understood to have details of the probe by Deloitte and Freshfields and isconsidering whether to take further action.
Shares in Batley-based Cattles are suspended after the firm delayed its annual results.
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 £500 million in wholesale funding with a bank consortium led by Royal Bank of Scotland by July 14. Cattles is pushing for a “standstill agreement” which will see these payments suspended while it resolves its future.
It said last week it was in “constructive” talks with its creditors in a bid to gain more breathing space.
In April it announced it would close its Welcome Car Finance car loans business to conserve cash, while it is also considering the sale of its invoice financing arm.
Cattles’ main Welcome Finance business is still up and running but has suspended lending to new customers in order to conserve funds.
Earlier this year the firm had to concede defeat in its long-running attempt to secure a licence for banking deposits in the current market turmoil.