Provident Financial £300m rights issue to draw ‘a line in the sand’

Doorstep lender Provident Financial launched a painful £300 million rights issue on Tuesday to draw a “line in the sand” on its disastrous run.

The Bradford-based company, a former FTSE 100 darling, will use the proceeds to shore up its balance sheet after revealing more than £190 million of charges linked to regulatory probes.

The Provvy, as it was affectionately known by customers, has settled with the Financial Conduct Authority watchdog over PPI-style mis-selling claims at its Vanquis Bank unit and will take a £172.1 million accounting hit.

It has also set aside up to £20 million to deal with the fallout from a separate FCA probe into Moneybarn.

New chief executive Malcolm Le May said: “I’m optimistic this puts a line in the sand on our investigations. Nobody likes uncertainty and by doing this we’ve taken uncertainty off the table.”

But the fundraising comes at a price: a steep 46% discount to the current share price and nearly £30 million of expenses to raise the money.

Le May said the rights issue had the support of top shareholders, which include Neil Woodford and Invesco. The money will also be used to make sure the company maintains its investment-grade rating.

The shares jumped more than 70% in their biggest rise for three years, and clearing 1000p for the first time since last August when a string of profit warnings due to a botched IT upgrade of its consumer credit division led to a share price collapse and the exit of chief executive Peter Crook.

His replacement, Manjit Wolstenholme, who was executive chairman, died after several months in the role last year, leading to the selection of Le May.