The chain, which has 280 shops, owes bondholders £220m in notes that are due for refinancing by next year. There had been some concern that the FCA would deny BrightHouse a licence, that the company would be hit with a large fine, or that the regulatory process would take so long it would prevent a refinancing.
Brighthouse breathes sigh of relief as it closes in on FCA approval
Written by Ashley Armstrong, Retail Editor, The Telegraph
The struggling rent-to-own electricals chain BrightHouse has revealed that the UK’s financial regulator has said it is minded to grant it a consumer credit licence so long as the company refinances its debt and sticks to its new business plan.
The Financial Conduct Authority (FCA) has been investigating BrightHouse, which lets consumers buy goods on extended payment plans, as part of its wider scrutiny of the hire-purchase sector amid allegations of overcharging and hard-sell tactics.
In an attempt to secure its credit licence BrightHouse has agreed to more stringent checks on its customers’ finances before lending to them.
BrightHouse, which is currently owned by private equity firm Vision Capital, said that it was able to demonstrate that it treats customers “fairly”. An investigation last year found that the cheapest washing machine at BrightHouse, which was available on the high street for £350, could cost as much as £1,056 if someone paid weekly over three years.
However, BrightHouse sales have fallen as a result of the tighter restrictions disqualifying more customers and creating longer queues.
Hamish Paton, chief executive, has previously said that the company is investing in new technology to address delays in shops that are harming ales.
The company said that the FCA would authorise it so long as BrightHouse demonstrates that it is “balance sheet and cashflow solvent” and that it had refinanced its debt by May 15, 2018.
BrightHouse now faces a showdown with hedge funds that began buying into its debt after the FCA said last year that it was working with the company to tackle a “number of immediate and pressing concerns” about business practices.
However, now that threat has passed, the company’s bonds have risen by 4p in the pound to 78p compared to the 65p mark that attracted the hedge funds.
“We are pleased to have successfully reached this important milestone and that the FCA is minded to authorise our business, subject to all of the above conditions being met by May 15, 2018 – primarily regarding refinancing our corporate bond,” the company said. “That refinancing is due by May 2018 and we are confident this will happen before then.”
The bondholders are working with advisers at PJT and Sullivan & Cromwell while BrightHouse, which was formerly known as Crazy George, is working with advisers at Rothschild and Freshfields.
The FCA declined to comment.
Source: The Telegraph