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Cattles issues update on possible write-downs

In what is basically a third profit warning in just a few weeks it has been revealed that sub-prime lender Cattles is on the verge of crystallising an £850 million write-down. The company has blamed a breakdown in its internal controls for the situation which will see £700 million written off for loan impairments over the last two years and a further £150 million for future expected impairments.

The situation at Cattles seems to be getting worse with a number of key staff already suspended pending an internal investigation by accountancy giant Deloitte. The company has also confirmed the need to restate the figures for 2007 which may have been misleading ahead of the internal investigation. While the update on potential loan impairments is bad news itself, more worryingly, there has been no update on the £500 million of debt which needs to be refinanced by July 2009.

As we have covered on a number of occasions, the situation at Cattles is very serious having forced the shares down from £3.40 to just 3.4 pence over the last two years. The internal investigation seems to be finding more and more issues which need to be resolved and despite the fact the group is looking to appoint a new management team there appears to be much work to do.

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