Debt matters

[joh71262]

so its not just me that thinks debt matters are useless....everyone else on here seems to get information updates ,we've had no reviews or annual reports, you shoyuld see the state of the variation report they have sent out to the creditors,all the info is wrong and by no meamns are they fighting our corner,if it wasn't for Ian Millington forum ex. on here i'd be on valium by now, at least he's trying to put my mind at ease .

I've had one review so far and, as I posted on another topic, they have demanded over £200 from me at one point and when I asked them how they had calculated it, they said they had got it wrong. They also sent me someone elses pay slips - lord only knows what I could have done with those - and I have voluntarily increased my payments by £20 a month and this has not even been acknowledged. It's a pretty poor show when people are literally playing with your life.

[OPTIMIST12]

Going back to the initial posts on this thread - does this not somewhat disprove the assertion sometimes heard that IVA Companies lose interest in a case once it has been approved and the Nominees fee secured? If well-respected companies are willing to voluntarily purchase the "book" of another company (with customers at various stages of the IVA process) than I would have thought this shows that the acquisition of that "book" must make sound business sense and that it would follow that the continuation of the acquired cases for their duration must therefore also be important?

If this is not the case then why would the companies concerned purchase the cases of IVAers who are well past the Nominee stage?

[goulda]

Hi optimist12

I was wondering the same thing - if the nominee has drawn all of his monies from "the pot" especially as in my IVA, how do the companies taking over my IVA make any profit. I am sure Melanie and Co. will give us the answer. At my last review it may be interesting to note that only two out of thirteen creditors had made a claim, Eversheds(Max Recovery) have not made any claims despite buying seven of the debts and no creditors have been paid any dividends but the Nominees(Debtmatters) have drawn £4,500 and the Supervisor £1,100. I paid in £9,084 in the first year

[OPTIMIST12]

Hi goulda -

I had 9 of my Creditors who did not lodge claims before my Creditors meeting. I hope to soon receive the Annual Report after my first review and really hope that I will find out that the rest have now lodged claims. As I have a Minimum Dividend Modification this will give me the chance to see exactly what my minimum "target" is in real figures.

It is a bit like being held in limbo until you have all the figures down on paper!!!

[MelanieGiles]

Here again we have posts casting doubts about the professionalism of my fellow practitioners - which to be frank I find difficult to keep responding to.

IPs do not just do work to get paid a nominee fee. Most IPs actually suffer a financial loss on that part of their work - especially from ridiculous creditors who now expect this to be done for four or five times your contributions.

Somone who can only pay £250 per month for instance may regult in a nominee fee of around £850 - yet the actual cost of doing that work is in the region of about £2,200. It is for these reasons you are seeing IP firms pulling out of the market, and it is not just the larger ones. Many good quality smaller regional practices are doing the same and selling their IVA portfolios, because the people who lend the money will not allow us to be paid a resonable fee for doing our work any more.

With regard to creditor claims - perhaps your experiences indicate some of the difficulty IPs actually have in drumming up interest from those who pay our fees in getting monies repaid to them. Under the new IVA protocal they have to submit their claims in four months or be excluded, so it will be interesting to see how many of them lose out on their dividend payments.

[OPTIMIST12]

Melanie -

Sorry if my post came across as critical- that was not my intention.

What I cant quite get my head round is that as providers - big and small - are starting to pull out of the IVA marketplace due to Creditors unreasonable changes to costs etc - what is the incentive for the purchasing companies to voluntarily take on the caseloads of others leaving the arena?

Surely if the market contracts too much then the majority of Creditors who are generally sympathetic to IVAs will have to bite the bullet and agree to a more relaxed fees regime? Otherwise they will have to enter the IVA business themselves!!

I was also wondering how all this affects a highly regarded company like Grant Thornton who both provide and vote on IVAs (though I know they do this through completely separate departments). Presumably they must be in an excellent position to see things from both sides?

[MelanieGiles]

Out of all of the IP companies which operate in this industry, I feel that Grant Thornton probably have a better understanding than most in that they are involved in both sectors of the process.

They will have carried a very careful due diligence exercise on the Debtmatters cases, and any client of Debtmatteers who is now going to be transferred to Grant Thornton ought to look forward to a good professional service into the future.

The incentive for purchasing IVA portfolios is quite simply the value of the outstanding fees and the amount of work left to be done to be able to earn and draw those fees. Of course to earn fees, you have to perform work, and this would have been properly evaluated in the due diligence exercise.

We have only recently become subjected to severe fee pressure from the banks - really from September 2007 onwards. So many practitioners - myself included - have sat back and evaluated whether we feel it is worth remaining in this industry, and importantly whether we can continue to give as good a service as we have previously provided under the new restrictions. In many cases the answer to that has been "NO"!

The value in acquisition of a portfolio that has cases from a range of years, is that the majority of those cases ought to be running with reasonable fees. And as I have said many times on this forum, it is a shame that some of the less professional operators - some of which may be deciding that this industry is no longer for them - have spoilt what is a very honest, trustworthy and diligent profession for those of us who have chosen to stay. No doubt things will settle in due course.

[goulda]

Melanie,

Does the four months for creditors to make claims apply to existing IVA's as well as new ones?

[MelanieGiles]

No - only to new ones which follow the IVA protocol.

[J-DOUBLEYA]

[quote]Originally posted by MelanieGiles

Here again we have posts casting doubts about the professionalism of my fellow practitioners - which to be frank I find difficult to keep responding to.

Come on Mel, the reason that IVA's have had such a bad press is that there are some rogue IP's out there and in quite a few cases offerring simply bad and inappropriate advice. The motive has to be money.

I have no doubt that you value your position and offer integrity as your middle name but that is definitely not the case across the board. To qualify as an IP is no easy feat whereas setting up a debt collection or debt advisory business is the opposite. I think we have seen a black period in debt advice finally passing. Unfortunately, I happen to agree that we will see some really good smaller companies simply saying, im off its not worth it and that will be a very sad day. I am not of the opinion that debtmatters will be a loss in any way.

I sincerely believe that we will see a period of re-alignment in the industry, hopefully robust legislation but not the demise of very good, honest and practical IP's .

[MelanieGiles]

So are you talking specifically about rogue IPs in practice that you have had personal experience of acting in a rogue manner, or debt advisors with no qualifications who set themselves up as debt experts and engage in inappropriate marketing, or both?

Again, we will no doubt disagree on this point, and I agree that much good work has been done over the last couple of years to address concerns about advice provided and the appropriateness of marketing. I am very positive about the future, but then I have no institutional shareholders or the City to please.

[J-DOUBLEYA]

Both actually Mel, both. No pofession is immune from chancers and downright foulplay. That is why I like these forums, they can get 'outed'

[caknight]

We rang and they advised they know nothing about it, what ever can we expect next?

[MelanieGiles]

It's been widely publicised in the national press!

[Phil]

Hi a Little more Info If you are Interested
P
Debtmatters Group plc ("Debtmatters" or the "Company")
Disposal of the IVA Book and of Debtmatters Limited
Change of name to Loanmakers Group plc


* The Company has completed its strategic review and, subject to shareholder

approval, plans to dispose of its IVA and debt resolution business.

Accordingly the Company confirms that it is no longer in a bid period.

* The Company's proposed new focus will be on its established loan broking

division, which has grown profitably to date and is trading in line with

expectations as previously announced.

* A Circular to Shareholders has been posted recommending the following

proposals:


THE DISPOSAL OF THE COMPANY'S IVA BOOK FOR A CONSIDERATION OF £6.4 MILLION
to a consortium comprising of Grant Thornton UK LLP and Totemic Limited.


THE SALE OF THE RESIDUAL DEBTMATTERS LIMITED BUSINESS TO CREDITFLEX
Group Limited for a consideration of £800,000.


PROPOSED NAME CHANGE TO LOANMAKERS GROUP PLC TO REFLECT NEW FOCUS. * All monies raised from the disposals will be used to significantly
reduce the Company's borrowings.

Ges Ratcliffe, Debtmatters CEO commented:

"It was becoming increasingly difficult to operate a successful direct marketing IVA business with acceptable profit margins in the face of increasing costs of case acquisition and reduced fee levels in tandem with ongoing sector uncertainty.

As a result of a detailed review, the Board has concluded that the best long term strategy would be to exit the IVA sector completely and focus on Loanmakers, the profitable loan broking part of the business, which was acquired in June 2006. This business has performed well to date and has the potential to deliver good growth. It also enjoys established relationships with lenders and will be supported by the recent securing of £3.5m of banking facilities, which will underpin its business.

Good prospects exist for Loanmakers but visibility is limited due to the range of challenges and uncertainties that exist currently in the financial markets."

For further information please contact:


Ges Ratcliffe CEO, Debtmatters Group plc 01204 845 700
Mark Prideaux Finance Director, Debtmatters Group plc
Rick Thompson / Carl Holmes Charles Stanley Securities 020 7149 6000
Nominated Adviser and Broker
Shane Dolan Biddicks 020 7448 1000


The Company has posted a circular to Shareholders containing proposals to dispose of the IVA Book for a consideration of £6.4 million to a consortium comprised of Grant Thornton LLP and Totemic Limited. In addition, the Company announces the disposal of the residual business of Debtmatters Limited for a consideration of £800,000 to Creditflex Group Limited ("Creditflex"), a company wholly owned by Ges Ratcliffe. The Company also announces that it proposes to change its name to Loanmakers Group plc.

A General Meeting has been convened to seek Shareholder approval of the two proposed disposals as well as the change of company name at 10.30 a.m. on 6 March 2008 at the offices of Halliwells LLP, 3 Hardman Square, Manchester M3 3EB.

Reasons for and details of the two disposals and use of proceeds

The Company announced in October 2007 that in light of the impact of certain modifications to its core IVA business and given the continued disappointing share price, the Board was to undertake a full strategic review of the business. Accordingly, the Board has concluded that it should dispose of the entire Group's IVA and debt resolution related activities, and focus the Group around the Loanmakers business. Accordingly, the Board proposes to change the name of the Group to Loanmakers Group plc.

The Board has entered into agreements in identical form for the sale of the IVA Book for £6.4 million in aggregate to a consortium comprising of Grant Thornton UK LLP and Totemic Limited. In addition, in order to focus on Loanmakers, the Board has agreed to dispose of the remaining business of Debtmatters Limited to Creditflex, a company wholly owned by Ges Ratcliffe for £800,000 and which Mark Prideaux, the Group Finance Director will manage. Following the disposal of Debtmatters it is intended that Mark Prideaux will leave the Group. The consideration for both disposals will be satisfied in cash which will be used to reduce group indebtedness.

The disposal of the IVA Book has meant that the Company has had to undertake a major redundancy programme which has been completed as the IVA side of the Debtmatters business employed 138 out of a total of 304 employees. A total of 87 employees have been made redundant, and a further 97 employees will leave the Group upon the sale of Debtmatters to Creditflex.

The sale of the IVA Book is deemed to be a disposal resulting in a fundamental change of business for the purpose of AIM Rule 15 and therefore is subject to Shareholder approval.

The sale of Debtmatters is deemed to be a related party transaction for the purpose of AIM Rule 13, by virtue of Ges Ratcliffe being a director of the Group and the owner of Creditflex and Mark Prideaux's intended involvement in managing Debtmatters Limited. The sale of Debtmatters is also deemed to be a substantial property transaction for the purposes of section 190 of the Companies Act, thereby requiring Shareholder approval.

The Directors have convened a General Meeting for 10.30 a.m. on 6 March 2008, at which Shareholders will be asked to consider, and if thought fit, approve the Resolutions in order to implement the Proposals.

Background to and reasons for the Proposals

2007 was a disappointing year for the Group and the difficulties in the IVA sector have resulted in a significant reduction in approved IVA case volumes. Having reached a peak of over 600 cases a month one year ago, the recent IVA monthly run rate is now in the region of 50 cases. The difficulties in the IVA sector are well documented and principally stem from an increase in costs of case acquisition and reduced fee levels, which have both combined to create a challenging environment in which to operate a successful direct marketing IVA business with acceptable profit margins. The discussions hosted by the British Bankers Association and the Insolvency Service to discuss amongst other things the issue of fees charged by insolvency practitioners proved inconclusive on this specific issue which has led to continued uncertainty across the industry and continued pressure on share prices in the sector. The Board therefore concluded that the Group should exit completely from the IVA sector in order to focus on the loan broking part of the business.

Disposal of the IVA Book

As part of the strategic review the Board asked Charles Stanley, the Company's Nominated Adviser, to conduct a formal auction process with the aim of identifying a preferred potential offeror for the IVA business as a whole or the IVA Book. The auction process ran through to January of this year.

At the conclusion of this process, the Directors, advised by Charles Stanley, unanimously decided the bid proposal received from the Consortium provided the highest and best offer for Shareholders and which has been conditionally accepted by the Board.

Under the terms of the IVA Sale Agreements, which are conditional, inter alia, upon the passing of Resolution 1 by Shareholders and the court approval of the cases being transferred to new Insolvency Practitioners, Debtmatters will dispose of the IVA Book to the Consortium for the agreed price of £6.4 million, payable in cash which will be utilised to reduce the Group's current bank borrowings of approximately £10 million at the date of completion.

The sale of the IVA Book is deemed to be a disposal resulting in a fundamental change of business for the purpose of AIM Rule 15 as the disposal proceeds are in excess of the market capitalisation of the Company as at 11 February 2008. By virtue of being deemed to be a fundamental change of business the disposal is conditional on consent from Shareholders.

Detailed summary of IVA Sale Agreement

As stated above Debtmatters has entered into two identical conditional sale agreements with each of Grant Thornton UK LLP and Totemic Limited, the Consortium, for the sale of IVA Book. Under the terms of the agreements Debtmatters has agreed to sell its IVA Book to the buyer for an aggregate total consideration of £6.4 million payable in cash of which £640,000 has been paid by way of deposit and the balance is payable on completion of the agreements.

Completion is conditional upon (1) the High Court of Justice (or other court of higher authority) of England and Wales granting an order for the block transfer of the appointments of the Company's officers as nominees or supervisors of the IVAs constituting the IVA Book to the buyer's nominated appointee and (2) the shareholders of the Company approving the sale of the IVA Book for the purposes of AIM Rule 15 at the General Meeting.

Following completion Debtmatters will remain responsible for the employees engaged in the business at completion and has agreed to give an indemnity to the buyer in respect of any potential liability which may arise as a result of the Transfer of Undertakings (Protection of Employment) Regulations 2006 applying to the transaction.

Certain limited warranties relating to the conduct of the IVA Book have been given by Debtmatters subject to a minimum threshold of £320,000.

Disposal of Debtmatters Limited

The Board has agreed, subject to Shareholder approval, to dispose of Debtmatters which comprises the residual domestic IVA business, the commercial insolvency practice and the nascent debt management business (a start up operation of the Group during the seven months to October 2007) for £800,000 payable in cash to Creditflex, a company wholly owned by Ges Ratcliffe. This disposal will facilitate the final move away from the IVA related sector following the disposal of the IVA Book and the redundancy programme which has been completed.

The main body of Debtmatters' residual business relates to corporate insolvency work which is generated almost exclusively through the contacts and personal relationships of the management team. A third party purchaser of the business would be unlikely to obtain recurring income from that business without the ongoing employment of the existing work winning individuals. The value of the business to a third party would therefore be restricted to the value of the work in progress. For this reason an auction process has not been undertaken for this particular disposal. However, Baker Tilly Corporate Finance LLP has prepared a valuation of Debtmatters following the disposal of the IVA Book. The result of the valuation is broadly consistent with the offer by Creditflex for Debtmatters. The offer by Creditflex is also in excess of the value of the recoverable work in progress.

The trading position of the Debtmatters business has remained disappointing, with the division continuing to incur trading losses, which have resulted from a reduction in income levels and margins. It is anticipated that working capital in excess of £1 million would be required to be injected in the Debtmatters business in the near term following its disposal to Creditflex.

The financial information on Debtmatters derived from the Interim results for the six months ended 30 September 2007, released on the 21 December 2007 is as follows:


Unaudited Unaudited Year ended
6 months ended 6 months ended 31 March 2007
30 September 2007 30 September 2006 (Restated)
(Restated)
£'000 £'000 £'000
Revenue 5,080,466 9,476,616 18,062,550
EBITDA (860,904) 3,874,265 6,319,098


The value of Debtmatters's adjusted net assets following the sale of the IVA book to the Consortium is approximately £1.4 million.

In light of the above outlined results and the general trend in the IVA sector the Independent Director believes that disposing of the remaining business within Debtmatters will give the Company as a whole the flexibility and resources to maximise the potential of the remaining part of the Company, being the Loanmakers business.

The proceeds of the sale of Debtmatters will also be employed to reduce the Group's borrowings.

As Ges Ratcliffe is Chief Executive and a Director of the Company and will be interested in the acquisition of Debtmatters by virtue of wholly owning Creditflex and Mark Prideaux, Finance Director of the Company also being interested in the acquisition, as he is leaving the Group to manage Debtmatters, the disposal of Debtmatters will be a related party transaction for the purposes of AIM Rule 13. The sale of Debtmatters will also be deemed to be a substantial property transaction for the purposes of section 190 of the Companies Act as the transaction is for a non-cash asset of a value in excess of £100,000 and therefore requires Shareholder approval.

Mr. Ratcliffe has a beneficial interest in 10,070,645 Ordinary Shares representing 32.41 per cent. of the issued share capital of the Company. As a consequence of his shareholding in the Company, Mr. Ratcliffe has undertaken to abstain from voting on Resolution 2.

Furthermore, Mr. Prideaux has a beneficial interest in 45,620 Ordinary Shares representing 0.15 per cent. of the issued share capital of the Company. As a consequence of his shareholding in the Company, Mr. Prideaux has undertaken to abstain from voting on Resolution 2.

The Independent Director, who is independent for the purposes of the AIM Rules, having consulted with Charles Stanley, the Company's Nominated Adviser, considers the terms of the disposal of Debtmatters to be fair and reasonable insofar as the Company's Shareholders are concerned.

Detailed summary of Debtmatters Sale Agreement

The Company has entered into an agreement with Creditflex Group Limited for the sale to it of the entire issued share capital of Debtmatters in consideration of the payment of £800,000 in cash on completion.

The Debtmatters Sale Agreement is conditional upon (1) the passing of a resolution by the shareholders of the Company for the purpose of section 190 of the Companies Act 2006 at the General Meeting and (2) completion of the IVA Sale Agreement.

No warranties are being given by the Company save as to its capacity to enter into the agreement and title to the shares in Debtmatters.

Following completion the Company has agreed to give an indemnity to Creditflex in respect of any potential liability which Creditflex or Debtmatters may incur directly as a result of the Company entering into the IVA Sale Agreement and the performance by Debtmatters and/or Creditflex of its obligations under the IVA Sale Agreement and any liability for Corporation Tax of Debtmatters accruing by reference to a period occurring prior to completion.

Remaining business of the Company

The loan broking subsidiary, acquired in June 2006, has performed well, as stated in the pre close period update on 1 October 2007, and has been growing in line with the Board's expectations. It was due to Loanmakers that the Group continued to be profitable at the half year. As reported in the interim results for the six months ended 30 September 2007, turnover from Loanmakers was £9.23 million (2006: £4.31 million for the 3 1/2 month period to September 2006.) and contributed £1.63 million of EBITDA. By contrast, turnover for Debtmatters fell by 46 per cent. to £5.08 million (2006: £9.48 million) and incurred a loss of £0.86 million in the same period.

Steady growth is anticipated and relationships with lenders remain strong. The Board are pleased to announce that new banking facilities have been agreed of £3.5 million for the Group. However, the current 'credit crunch', tighter lending standards and general uncertainty in the financial markets may have an impact on Loanmakers in 2008.

Change of Name

In order to clearly move away from association with the IVA sector and to refocus the business on loan broking the Board feels that in addition to the proposed disposals of the IVA Book and Debtmatters it should change its name from Debtmatters Group plc to Loanmakers Group plc, which will be the focus of the Group going forward, as the name of Debtmatters will always be associated with the IVA sector.

Management composition

Ges Ratcliffe will remain as full time Chief Executive Officer of the Company and as such will have no involvement as an Insolvency Practitioner on any new appointments in the ongoing business of Debtmatters. His role in Creditflex will be limited to that of investor and non-executive director. Mark Prideaux will step down as Finance Director of the Company with the intention of focusing on the management of Debtmatters. He will remain with the Company for an interim period to ensure a smooth handover to a successor.

Future prospects of the Company

The Group has for a time been operating in two contrasting markets with both economic uncertainty and negative market sentiment continuing to depress the debt resolution market and in particular the IVA sector while the loan broking business has grown in line with expectations even under the current circumstances of the 'credit crunch', tightening credit criteria and general well publicised negative sentiment. Your Board is therefore of the view that the time is now right to continue to build on the prospects that Loanmakers has displayed while at the same time moving away from the debt resolution market by disposing of all IVA related activities thereby enabling the management to focus on growing the more profitable part of the business Loanmakers.

Copies of the circular sent to shareholders will be available at the offices of Charles Stanley Securities at 25 Luke Street, London EC2A 4AR and will be also be available to download on the Company's website.