British lender Non-Standard Finance (NSF) today said it wanted to raise £80m in the third quarter through a share sale that would be backed by its largest investor Alchemy.
NSF said the equity raise depended on talks with the Financial Conduct Authority over a proposed compensation payment scheme for customers of its guarantor loans business.
Following the announcement, shares in NSF plunged by more than 11 per cent as markets opened.
The firm, whose loan book was just two-thirds of what it was a year earlier after a Covid-hit 2020, said in February that it needed more capital to avoid covenant breaches.
Over the past year, complaints have surged against guarantor loans, which require a friend or family member to guarantee they will take on repayments if the borrower fails to.
London’s High Court last month rejected lender Amigo’s rescue plan that would have cut compensation payouts to customers for mis-selling loans.
Another subprime lender, Provident Financial, said it plans to close its doorstep lending arm and exit the home credit market altogether after complaints built up against the company.