Schemes of Arrangement
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CATTLES PLC SCHEMES
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THE SCHEME MEETINGS ARE TO BE HELD AT THE ALBERT HALL CONFERENCE CENTRE, NORTH CIRCUS STREET, NOTTINGHAM NG1 5AA COMMENCING AT 10 AM ON TUESDAY 1 FEBRUARY 2011
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I have now read the documents in relation to the schemes.
My conclusions are:
SHAREHOLDERS ARE STILL GETTING THE SHORT STRAW AND IF WE WANT TO GET ANYTHING OUT OF IT WE HAVE TO TRY AND AMEND THE CREDITORS SCHEMES.
TO ACHIEVE THIS I NEED YOUR COMPLETED, SIGNED PROXIES FOR THE CREDITORS MEETINGS.
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Please PRINT OUT the FORMS OF PROXY. They are on the home page. Then READ, CHECK AND COMPLETE before signing and returning parts A.B.C.D.E of the proxy forms to me as soon as possible.
The WFSL proxy has interesting numbering but as it cost £19.7 million to put strange numbers who am I to complain.
Please print off, complete, sign and return to me for lodgement with KPMG
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- Index -
INTRODUCTION
OVERVIEW
IMPORTANT INFORMATION
PROPOSED AMENDMENTS
PROXIES AND VOTING FORMS FOR SHAREHOLDERS MEETINGS?
THE CREDITORS MEETINGS
IT IS IMPORTANT
HOW TO SUBMIT THIS FORM OF PROXY TO: Ian B Dearing
GUIDANCE NOTES
Trying to upset the structure they (the directors) have created in collaboration with the banks, noteholders and bondholders is probably futile. They have spent nearly £20 million getting so far and have nearly 2 years start on us.
There is a massive deficit between what is owed to the banks and the cash which is expected to come in from the Welcome Finance (WFSL) loan book.
The banks/noteholders, who have the benefit of inter company guarantees from companies in the group, are therefore not going to get everything they are owed back.
Their claims have precedence over any claims by Cattles (CTT) against WFSL. So shareholders as such would get nothing on a winding up but might get a p/£ as creditors.
They expect to get more money from keeping WFSL going, so as to collect out the loan book rather, than putting the group into administration.
To achieve the best result for the banks, sops are being offered to shareholders in the form of the 1p/share and some £50m or so proposed to be put into the CTT creditors’ scheme for the benefit of banks, noteholders and bondholders and any other creditors who are not being paid in full i.e. shareholders.
The benefit of rights of action of CTT (against say PwC) would fall into this pot.
WFSL creditors, after payment of ordinary trade, take the benefit of monies generated by WFSL.
Ewbanks scheme gets rid of cross company guarantees and enables the Lewis Group (TLG) assets to be sold free of liability. The benefit of TLG goes to the guaranteed creditors (Banks/noteholders I think). You may have wondered what was going to happen to TLG as it appears to be “profitable”
The only thing we, as shareholders, lose by voting for the shareholder scheme is that none of the directors would be subject to the scrutiny and sanctions of an insolvency report which might be expected if any of the companies went into insolvency- administration or winding up.
I perceive the schemes overall as being for the benefit of the banks and noteholders. Shareholders and bondholders are at the bottom of the pile and I am not sure which class does worst.
What the documentation does show is that “ a number of Public Statements made by Cattles (which include Cattles’ 2008 Rights Issue Prospectus, its prospectus for the issue of the bonds, its annual and half yearly reports, its interim management statements and its regular stock exchange announcements) contained inaccurate financial and other information. It is possible that investors (including current and former holders of the Shares, Notes and Bonds) that invested in the debt and/or equity securities of Cattles may have a claim against Cattles and/or WFSL (see paragraph 3 of Part 7 below) for the loss that they may have suffered. Such claims could include claims at common law and under FSMA”.
The Financial Services and Markets Act 2000, particularly sections 81, 90 and 90A (new), provides for compensation to be paid to people who have bought held or sold shares in reliance on misleading or incorrect information from the issuer.
The compensation is payable by the issuer of the securities (CTT in respect of the rights issue shares and bonds; possibly also private placement shares also depending how far back the problems go- 2003 is the earliest reference in the documents) and, in respect of prospectus matters, the persons responsible for the prospectus, namely, the directors at the time (at least).
I have difficulty in seeing how CTT could oppose a claim by a shareholder to claim the amount of his loss if he has bought sold or held and loses at 1p/share. A claim against WFSL is not so simple and straight forward – they recognise that in part 7 para 3- but it is not ruled out.
So far as directors are concerned I would expect the present incumbents to seek to rely on the defence provided by Schedule 10 of FSMA in any proceedings against them. This is that they made all reasonable enquiries and so are not responsible.
Until we know who did what it is impossible to make any sensible comment, but whoever did the doing of the evils which gave rise to the concealment of the dreadful state of the loan book, if they are or were formerly directors, then they are in the frame to compensate rights issue subscribers at the very least. The fact that 3 directors were summarily dismissed without compensation suggests there is the probability of a strong case.
There is likely to be some directors’ liability insurance, but the extent of this cover is unknown.
You will have noted that the compromises preventing CTT from suing the former directors/employees are now made public, but if CTT or the other directors are sued- as I am confident they could be under FSMA - then they will be joined in.
The explanatory document (and CTT and WFSL) recognises that there can be other claims by shareholders, past and present, against CTT and WFSL- they say under common law: I immediately think this could entail negligence and equitable fraud because of the way they set matters up and “concealed” the existence of the cross company guarantees whilst getting CTT to raise money for WFSL.
One of the provisions of the Schemes, as they have them drawn, is to prevent court proceedings against the companies or their directors or officers or former directors or anybody else.
The present directors are “excluded Creditors” in the Cattles Scheme so they will be paid in full.
Another tries to prevent creditors saying anything about the companies to anybody. I wonder what they do not want to be made public?
Yet another requires creditors whose claims are not admitted (and it is in the interests of the banks for shareholders claims not to be admitted- let alone publicised because that will reduce the pot available to them) to apply to the Companies Court to resolve them which will mean a creditor has to pay £1600 in court fees alone to have his claim determined. And that is without lawyers!
In combination these provisions work against the interests of shareholders and former shareholders and the main beneficiaries of this are the people responsible for the losses because they cannot be sued so they have got away with it.
The effect of the schemes, if approved, is that claims have to be lodged. If they are not lodged before the Bar Date then they are lost.
However good your claim is, if you are too late in the schemes you don’t get anything.
I have prepared amendments to the schemes and copies of my initial drafts are posted on the www.cattlesshares.co.uk website.
In short these amendments proposed are to have the effect:
1. preservation of the rights of shareholders to sue others who might be jointly or severally liable with either of the companies to pay compensation for the losses sustained ;
2. a representative/group action by representative shareholders covering the perceived representative classes of shareholder:
a) one pre rights issue-preferably pre 2003, who may be:
b) one rights issue subscriber;
c) one post rights issue purchaser;
d) one pre rights issue shareholder who sold out before suspension in April 2009,
against such of the companies and their directors, former directors, other present and former officers and anybody else concerned as they may be advised to establish liability against them or some of them with quantum determined (if possible) by 3 independent insolvency practitioners. This action to be conducted economically and at the expense of WFSL. The object of this procedure is to provide a simple and efficient method of resolving the issues of liability and quantum which will affect the majority of shareholder claims which might be disputed and otherwise uneconomic to pursue;
3. to provide for shareholder representation on the initial creditors committees;
4. to allow a majority in number of creditors to take over (at their expense and for their benefit) an outward claim (like against PwC) if the majority in value want to walk away from it
5. to spell out that creditors are not prohibited from disclosing information they have about the companies.
My initial draft is imperfect but I think the substance of these proposed amendments needs to be adopted in the schemes then we can vote for them.
At this stage it is not necessary to prove anything, but you will in the future need to be precise as to the amount and constitution of your claim.
In short your claim to compensation is the cost of your shares less the sale proceeds or value at 1p.
You can claim interest.
Supporting evidence is copy contract notes… (I don’t think they are going to get involved in probate valuations and reserve my position on gifted shares where valuation is not simple and in respect of shares held since before 2003). They are not necessary at this stage but could be beneficial. If they were supplied then your claim could be stated precisely and the value added up.
Details of how the claim arises are, in brief, acquisition continuing to hold and disposal on the basis of misleading information published by the Company under FSMA, negligence and equitable fraud
Persons jointly responsible are CTT/WFSL and the directors up to 01.07 2009 of CTT and WFSL.
Claims should therefore be made under both creditors schemes. The forms of proxy incorporating claim form are on the home page.
The claim, where holdings in ISA or SIPP are technically with the person administering the scheme; where they are held by nominees again technically by nominee co BUT I suspect that if you speak to your holder- say Halifax or Hargreaves Lansdown they will agree to you signing the forms of proxy on their behalf. Even if they don’t agree sign them and send them anyway.
PLEASE PRINT COMPLETE AND SIGN ON PAGE 4 BOTH FORMS OF PROXY AND RETURN THEM TO ME FOR LOGMENT:
Ian B Dearing, Stanley House, Clitheroe BB7 1AD.
These claims might amount to something – 27p/£ would be good but even 1p/£ is better than nothing.
PROXIES AND VOTING FORMS FOR SHAREHOLDERS MEETINGS?
I am inclined to go in favour of the take-over scheme and alteration of articles
I am inclined to go against approving the 2009 Accounts, simply because I cannot reconcile the words of Margaret Young, : “This board will not turn its back on these challenges” with her indication that she and Messrs Haxby, Dee and McWalter intend to resign on conclusion of the scheme procedures.
The cynic in me says she is not resigning now because that would mean she might miss another bonus opportunity and her colleagues another few scoops out of the gravy boat. They would say that they are doing a wonderful job for shareholders and poorly rewarded for all the effort which they have put in- (after the horse has bolted I riposte).
If you wish to appoint me as proxy I am happy to be appointed, as will Chris Stroud and/or Douglas Moffitt, to vote as you direct or otherwise as I decide- currently as above.
The Creditors meetings are more complicated. I would like to receive your proxies (with the same alternates) to vote at discretion subject to any amendments to the scheme which I propose or adopt.
Under their structure we cannot vote for “with the amendments” or against if the amendments are not made.
What I hope for is sufficient support to make the banks realise that shareholders are concerned about losing all their money and want a FAIR participation in the little that is left.
In the amendments I propose to the schemes is something to cover my main concerns including that disputed claims are resolved in one court case involving everybody at the expense of WFSL. A representative four shareholders are proposed as claimants representative of the main classes and all the candidates- CTT, WFSL, their past and present directors and others are proposed defendants.
I will explain my logic behind this to anybody who assures me that they are not going to disclose my logic to anybody connected with the companies or the other creditors.
I think that MY has got into my mailing list and I would rather she knew what was going on when I want her to know and not before.
IT IS IMPORTANT that as many claims are lodged in relation to the creditors schemes as possible so that the overall position of individual shareholders to claim is protected.
The more proxies that I have in my possession the better I will be able to represent the shareholders affected and negotiate, hopefully, to agree a compromise.
The Cattles Shareholders Association Limited has been formed and a further circular in respect of it will follow shortly. News should go onto the website but that is low on my immediate list of priorities. Chris Stroud (Holcomber formerly Cattles 4) is appointed Chairman.
Its role will, I hope and suspect, be in relation to the litigation against the (former) directors.
We can also provide assistance in properly completing claim forms in the schemes.
REMEMBER IT IS IMPORTANT that as many claims are lodged in relation to the creditors schemes as possible so that the overall position of individual shareholders to claim is protected.
The more proxies that I have in my possession the better I will be able to represent the shareholders affected and negotiate, hopefully, and agree a compromise.
Speaking individually to you it is difficult for me as my time is not my own, and just keeping abreast of the mountain of papers is a full time job.
I will answer emails as soon as I can.
Others are assisting in communication with other shareholders and spreading the word and may be able to take on answering any questions you have.
Many of you have offered to help and if any of you would like to call other shareholders in your area I can (hopefully) supply details from the shareholders register.
Any volunteers with time in London could help the men who are going to man phones there and try and follow up a direct mailing to some shareholders and former shareholders
It would be wonderful to receive 500 proxy/claim forms for the creditors’ schemes.
In the Creditors Schemes 500 attending votes are likely to mean considerably more than 50 million votes in shareholders meetings so I think we have a better chance of making some headway at last.
The greatest number of creditors is, in fact, the shareholders.
Ian B Dearing
