30 March 2020
BrightHouse collapses into administration with administrators, Grant Thornton, now attempting to salvage parts of the business.
Customers are advised to keep making monthly payments for them to keep their household goods. The administrators will act as the collecting agent. If customers fail to make repayments, despite the company being in administration, extra charges can be expected as can a harmed credit score - however if the reason for failing to pay is due to coronavirus, these measures will not be taken.
2,400 jobs are at risk. Further update is expected on Tuesday.
NOTE: We are not the administrators so please do not call us if you are a customer/reseller, thank you.
27 March 2020
Rent-to-own firm BrightHouse is set to collapse on Monday, with Grant Thornton to become the administrators. This decision is likely to put 2,400 jobs at risk.
At the start of the month the company were in talks of collapse, with administrators being put on standby after facing a influx of costly compensation claims for selling to people who could not repay.
Stricter lending rules pre-pandemic and now shops being forced to close due to coronavirus, have made the situation for the business a whole lot worse.
It is understood that tentative restructuring plans were scrapped as the pandemic gained pace and investors withdrew support.
BrightHouse, with 240 UK stores, has 200,000 customers and is the largest operator in the rent-to-own sector. Its administration would mean customers with outstanding mis-selling complaints will only get a fraction of the sums they are seeking.
2 March 2020
BrightHouse has been forced to put administrators on standby as it teeters on the brink of collapse. Sources say that Grant Thornton, who oversaw the administrations of payday lenders Wonga and QuickQuid, have been chosen.
A surge in customer compensation claims has meant the likelihood of insolvency is possible for the firm in the coming weeks. If so, 2,400 jobs could be put at risk. Claims are currently costing £1m every month although executives are understood to believe that the eventual toll will be greater than this as claims management companies overload it with complaints.
The company, with around 240 UK stores, provides loans to consumers to purchase a variety of electricals including televisions and washing machines.
It has been facing financial issues for years. It was only in 2017 that the company engaged in a restructuring with the aim of putting it on more stable footing. Bondholders pumped further investment to the company in exchange for taking control, leaving Apollo Management and Alteri Investors with around 40% of the equity.
It is believed that advisers such as EY and Freshfields Bruckhaus Deringer have been working alongside the company for the past few months, to explore alternative options. One option is a scheme of arrangement to deal with mis-selling claims, though the Financial Conduct Authority (FCA) are uncertain about such a move.
When results were issued to bondholders on Friday, BrightHouse said it was conducting a strategic review to maximise value for stakeholders, including a shift away from rent-to-own activities and more towards cash loans.
Employees have been told that there were talks going ahead to sell the logistics and engineering division of the business, which accounts for about one-fifth of its workforce.
The entire rent-to-own sector has been struggling since a price cap was imposed by the FCA, last year. It acts to protect customers, meaning that customers are no longer able to repay more than double the cost of their loan.
In 2017, the FCA ordered the company to repay almost 250,000 customers for its act as an irresponsible lender. Over 80,000 people were not properly assessed by the firm for their ability to repay their loans.
A spokesperson for the company said ‘’BrightHouse is exploring a range of options to cap its exposure to claims for historic mis-selling. Recent updates, most recently on 28 February, have quantified the provisions raised against the cost of these. To be successful in this, BrightHouse needs the support of its stakeholders and is currently in active discussions with them. Naturally the protection of value in the business and safeguarding of customers’ interests are core to our planning.’’
This is not the first time we have seen such surges in claims trigger the demise of short-term lenders. The same situation happened with Wonga and more recently, QuickQuid. What will the outcome be for BrightHouse?