Debtmatters, Grant Thornton and Payplan

[MelanieGiles]

There have been a number of postings recently on the forum from clients of Debtmatters who have had their cases transferred to Grant Thornton and Payplan. This results from a sale of the Debtmatters IVA portfolio, following a strategic review of that business carried out by its shareholders at the beginning of the year.

I have today discussed various issues with one of the senior partners at Grant Thornton, and now wish to provide further details of this acquisition which may be helfpul to any forum members who have been affected by the transfer.

Approximately 4,500 cases were purchased by Grant Thornton and a similar number by Payplan on 20 February 2008. There is no connection between Grant Thornton or Payplan, although teams from both companies are working together with the remaining Debtmatters staff to ensure a smooth transition.

Informatory welcoming letters have been sent to all clients by the respective purchasers to reassure their new clients of their best attentions and future strategy. Following a detailed due diligence exercise, both Grant Thornton and Payplan have decided to vary the terms of all arrangements to bring them in line with their own practice requirements and to address any anomalies or differences in standards.

This will involve the calling of creditors meetings in each individual case, which is deemed to be a major, but necessary, exercise. This is not likely to affect the level of payments or the duration of the IVA, unless the circumstances of the case would suggest such changes, but could affect the eventual dividend returnable, hence the need for creditor agreeement at an early stage.

I have been advised that the intention is to cause minimal interruption to existing payment arrangements with clients, and that it is hoped that clients who are currently in arrears with their contributions will be afforded some leeway in order to make these up - perhaps by a short extension of the terms. This exercise is being carried out with the best intentions of former Debtmatters clients, and gives a vital second chance for cases which might otherwise have been failed under existing terms and conditions.

Given the size of the caseload, and the need to work as quickly and diligently as possible, it has initially been decided that this exercise should be carried out from one site - and Payplan's offices in Grantham were deemed to be the most suitable location. This is why the Grantham address is initially being used for all former Debtmatters clients transferred to Grant Thorton as a first point of reference, although there is a team of fully qualified and experienced personnel from Grant Thornton working on their share of the cases also out of Grantham. In time, the cases are to be transferred back to their main offices in Belfast, which are staffed by a complete team of appropriately qualified and experienced staff.

The Grant Thornton partners acknowledge that recent events have been unsettling for their new clients, and that there must be a lot of uncertainty as to their own intentions with regard to the future - particularly with regard to the proposed variation meetings. They wish to convey, through the medium of this forum, that they intend to look after each and every one of their new clients and very much welcome you all to their organisation. As I have frequently stated on this site, this firm are one of the best and most professional operators in the whole insolvency industry, and have the backing of a world leader in terms of accountancy and business consultancy services.

I have not been asked to speak specifically for Payplan, but as this firm are one of the longest and best established firms in this industry I am sure that they are also intending to operate with their new clients' best intentions at heart.

It is not unusual for IVA cases to be transferred from one firm to another, I have been involved personally in several transferred portfolios during my career, so there really is nothing to worry about. This forum is, as ever, open to deal with any queries clients may have who are affected by the Debtmatters sale, and I am able to raise general issues on behalf of forum members, however specific case related queries do need to be raised with the appropriate people on the number contained within the welcome letter.

I hope that this post is helpful, and may serve to supplement the information already provided directly by both Grant Thornton and Payplan.

[Adam Davies]

Hi
Thanks Mel for this info and thanks to Grant Thornton for the clarification
Regards

[joh71262]

Thank you Mel. It's just a shame that Debtmatters, GT and PP haven't supplied this information. All I have received is a rather shabby looking leeter on photocopier paper informing me that I will be moved across to GT.

If it hadn't been for you and the other IVA advisors, I would have been none the wiser until the letter arrived. Thank you for taking the time to get this information and post it.

(Do you ever sleep ?!?)

[MelanieGiles]

The older I get the less sleep I need, and sometimes I really have to drag myself away!

Be patient with GT - I promise you they are really a good firm.

[go_4_broke]

I was wondering why Debtmatters might have taken this decision, a quick Google revealed quite a lot like the following courtesy of proactiveinvestors.co.uk.

Shares in Debtmatters (AIM: DEBT) plunged a whopping 68% to 21.5 pence today after the company issued a stark outlook for the Individual Voluntary Arrangement (IVA) sector. The IVA sector flourished in 2005 & 2006 as individuals with high levels of debt opted to enter into IVA's with creditors rather than declare bankruptcy. However the entire sector has been undermined by banks, credit card companies and other lenders becoming increasingly hostile towards the large fees that IVA arrangers have been making in return for securing IVA arrangements for clients. The sector has also witnessed an explosion in new players, which has in turn increased competition and inevitably squeezed margins. Debtmatters said it was undertaking a full strategic review to consider all options for the company, which include seeking a possible offer, due to the possible impact of fee modifications on its IVA business.

Debtmatters is now valued at just £5.3 million, a fraction of its market cap only 18 months ago when it was trading above 300 pence. Other IVA companies followed suit with Debt Free Direct (AIM:DFD) off 33.9%, Debts.Co (AIM:DETS) off 19.8%, Accuma (AIM: ACG) off 28.9% and Invocas (AIM:INVO) 20% worse off.

[MelanieGiles]

It's a tough industry for all of us at the moment - the strongest will survive!

[Ivy]

I have debts of £87,000 and was initially with Payplan until I found out myself that an IVA was what I really needed and went to Grant Thornton. GT have been superb and I have recommended a couple of other people to approach them and they too have only praise for the team. Payplan may work for other people. My critisism was that at no point did they mention an IVA which was more appropriate for someone with debts as large as me and as a result I lost 2 years in finalising my debts. No-one froze the interest while I was with Payplan.

[ianmillington]

Thanks for the information Melanie. It's very helpful - it was becoming more and more difficult to advise people on what these changes meant to them, given that the parties involved didn't appear to be saying too much.

Also Admin thanks for giving this thread its own home. My guess is there will be other sales and consolidations happening.

One point - from the information you have given it would appear that there are to be wholesale and major changes made to the terms and conditions of the proposals which I would imagine that both debtor and creditors need to agree with, I can imagine that the creditors and their reps will be aware of the primary differences already and won't have a problem with it. Whilst I know they don't need advice from a small player like me, I think it will be a great PR boost for them and helpful to everyone if they can send the clients a list of the principal ways in which these changes will affect them, if at all.

Ian

[MelanieGiles]

Ian

I have seen a copy of the GT welcome letter this morning, and it is very informative and explains the reasons for the variations and lists each one out separately. Clients are asked to sign their agreement to the proposed variations, and return them directly to GT following which a meeting will be called.

I have to say that I believe this will give these clients, some of whom may have been having difficulties with their previous provider for some time, the opportunity to get their IVAs back on track, and most importantly see creditors repaid.

[Phil]

Thankyou Melanie for taking time and effort to get this information.It will be interesting to see when I get my letter from payplan to what changes to the terms and conditions to my arrangement they will make.My fees from debtmatters are around £12000 and I have so far paid £10600 in 12 months so like i said before will see what transpires

P

[goulda]

Melanie

Speaking hypethetically what would happen if a client refused to sign the letter I am not suggesting in anyway I will do this.

I have spoken to a clerk from Grant Thornton who has put my mind at rest and she has assured me there will be no differences to me in my IVA

[Cybus]

I found it interesting that they say that they need to vary the terms of all the arrangements, to bring them in line with their own practice requirements and to address any anomalies or differences in standards. Surely a transfer to a new Supervisor should be just that, a transfer to a new Supervisor of a proposal in it's original terms as agreed at the meeting of creditors. I would be interested to hear other IP's thoughts on that particular point.

Call me cynical ... but at whose expense are all of these meetings going to be convened? I may be wrong, but I would not envisage either Payplan or Grant Thornton to between them convene potentially circa 9,000 meetings for nothing.

Is there therefore going to be an additional expense of the arrangement and if so is it being funded by the creditors in return for a reduced dividend or is it at the expense of the debtors who may already have an obligation to meet minimum dividend requirements and will therefore HAVE to introduce more funds in to the arrangement.

If you were on the outside looking in, it may seem like Grant Thornton and Payplan are effectively asking the creditors and debtors to fund a percentage of the £6.4 million they paid out to buy the IVA book from Debtmatters. Of course this is all assuming that the costs of these meetings is not going to be absorbed by the two buyers.

It would be interesting to see how creditors react on this point. Will they act for themselves independently in voting (Given that in some instances, Grant Thornton cannot act on their behalf because of a conflict of interests)

[joh71262]

I'd be interested too Cybus as my fees are almost 50% of what I am repaying already (£15k over the 5 years). Obviously I don't know what is involved behind the scenes, but personally I feel this is more than enough when you take into account the original debt, what I am paying back and what the fees already are.

[MelanieGiles]

To Gouda

I believe that the changes being proposed are going to improve the terms of your arrangements rather than to have a detrimental effect - for instance there is to be leeway for the Supervisor to reduce payments by up to 15% for non-homeowners and 20% for homeowners to take account of cost of living increases, and an extension of the duration of the arrangement to allow for clients who are in default or who have missed contributions.

[go_4_broke]

It's a tough industry for all of us at the moment - the strongest will survive!

Frankly Melanie my money would be on you guys. It is the volume providers who are coming unstuck, I saw another item that said Debtmatters were down from 600 IVA'a a month to around 100 at one point.

I'm not sure IVA's should ever have been sold in this way, it is really a specialist product tho I accept that the volume providers have given access to IVA's to a lot of people who might otherwise have found it difficult to get one.

Best Regards, Simon