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Cattles issues profits warning

Doorstep lender Cattles has today issued a substantial profit warning which wiped 75% off the company's value. The company is now a mere shell of its former self with over £2.6 billion of debt, of which £500 million must be refinanced by July this year. While you would have expected doorstep lenders to be in their prime at the moment, with the fall of the economy and less credit via traditional means, it seems as though bad debts are literally killing the industry.

A recent application by Cattles for a UK banking licence was rejected although this would have allowed the company to take deposits from customers, which would have helped finance the outstanding debt, rather than depend upon money markets where the cost of finance has been rising. Even though UK base rates have fallen to record lows, growing concern about the outlook for UK businesses has translated into an increased cost of borrowing in the money markets.

While Cattles is not the only doorstep lender to have suffered over the last few months, after initially enjoying a period of prosperity, there are severe financial worries in the short term and the outlook does not look good. The company is currently reviewing its impairment provisions with regards to potentially "bad" loans which could delay the publication of the company's 2008 report and accounts.

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