Paragon attempts to stave off a crisis
Paragon, the beleaguered mortgage lender, is prepared to sell off a £140m reservoir of car loans as part of its attempts to stave off a crisis rights issue.
The buy-to-let specialist revealed last week that it may need to tap its shareholders for £280m by the end of February to stay in business.But it is now lining up sales of a sum of loan books in an endeavor to raise cash. Along with the book of car loans, the visionary disposals are thought to embody a £60m portfolio of unsecured loans and a £60m book of hire purchase lending agreements.
It also has a £450m book of secured loans.Although the disposals may not furnish enough cash to solve all of Paragon’s problems, it is implicit that they could help the company renegotiate terms with its lending banks. Paragon is nevertheless in talks with its lenders, JPMorgan and Royal Bank of Scotland, about a possible renewal of a £280m working capital facility and a £2.3bn warehouse facility, which is the mortgage lender’s prime origin of funding.
Although Paragon’s advisers at UBS are willing to guarantee a discounted rights issue, the company still thinks it will not need to use the facility, and that it can maintain a suitable agreement with its bankers within the next few weeks.
It is understood that the lending banks have been attempting to mediate the renewal of the working capital facility and the warehouse funding line as one deal. Paragon is now attempting to renegotiate the two deals apart, and may attempt to find other banks interested in supporting a deal. If the company cannot meet new terms with the banks it will have to stop lending, and its existing mortgage book will go into run-off.The first move comes as all Britain’s mortgage banks struggle to shore up their funding position to allay market fears that they could become the next Northern Rock Bradford & Bingley sold a £4.2bn book of commercial loans to General Electric and Dexia last week, which offered security to the market.
Alliance & Leicester has completed two large private placements of mortgage assets since the close of September and is thought to have secured its funding posture until the middle of next year. But the bank is still attempting to secure increased funding, according to market sources.
November 25th, 2007 - Posted in Remortgages | |
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