Credit Card Group CPP Seeks Last-Ditch Rescue

By Mark Kleinman, City Editor

The troubled credit card protection provider CPP is in talks today about a last-ditch financing extension that would avert the short-term threat of administration.

I understand that one of the options on the table between CPP and its lenders is a six-month extension to its borrowing arrangements that would buy the company sufficient time to negotiate a longer-term deal.

A six-month agreement is understood to have been the likeliest outcome from the talks until a couple of days ago, although insiders today cautioned that the situation was "fluid" and that several options remain on the table.

Sky News also understands that CPP's board has drafted in Greenhill, the investment bank, and KPMG, the accounting firm, to advise it on its options following the collapse in its share price triggered by its involvement in a major mis-selling scandal.

Hamish Ogston, CPP's founder and the owner of roughly 60% of its shares, has approached the board about taking the company private.

Hamish Ogston is the founder of CPP

Barclays, Royal Bank of Scotland and Santander UK must agree to extend or renegotiate CPP's loans by the end of tomorrow, or the company risks falling into administration, threatening 1500 jobs. The trio have called in PricewaterhouseCoopers to advise them.

In a statement two weeks ago, York-based CPP said: "The Group confirms that it has today agreed with its existing lenders a two week extension to the maturity of the Group's revolving credit facility from 31 March 2013 to 12 April 2013.

"This extension will allow the Group to continue discussions relating to a number of alternative financing and strategic options with the aim of concluding these discussions prior to the extended maturity.

"The Board remains focused on reaching an agreed financing solution with a view to ensuring the viability of the Group in the short and longer term, although there can be no certainty that such a solution will be found."

CPP was fined by the City regulator last year for selling credit card and identity theft insurance to customers who did not need it, and faces a bill running to tens of millions of pounds for redress.

In addition, the banks which sold CPP products also face a massive bill for compensating customers, which would be through a scheme of arrangement structure administered by Ernst & Young.

Discussions between the banks, CPP and regulators have so far failed to result in an agreement. The Financial Services Compensation Scheme may have to step in if a deal is not reached, according to insiders.

CPP declined to comment.

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