(Reuters) - Non-Standard Finance Plc slumped to a record low on Wednesday, after the British doorstep lender said it would need to raise fresh capital after breaching first and second quarter lending covenants critical to its attempts to stay in business.
The loss-making company, which has obtained short-term waivers from creditors on those breaches, said in a statement that a fundraising could remedy the covenants but it would first need greater clarity on the extent of liabilities linked to a redress scheme set up to compensate some of its customers.
Last year, the lender joined its larger rival Provident Financial (LON:PFG) in exiting its home credit market after facing a sharp increase in complaints and intense regulatory scrutiny.
NSF, whose lending unit entered into administration in March, said it will pursue a court-based process, such as a scheme of arrangement or restructuring plan to better ascertain its redress liabilities.
"If successful, the proceeds of the capital raise will be used to fund a cash pot which will be available to finance the payment of redress liabilities to affected customers and to strengthen the Group's balance sheet and underpin future growth," NSF said in a statement.
Shares in the company tanked as much as 58.7% to 0.77p as at 0756 GMT.
The company said it did not expect the process will provide for claims to be paid in full but without fresh capital, the group's ability to remain a going concern was subject to material uncertainties, it added.
"Without the process, the directors believe a capital raise would not be successful and therefore insolvency is the most likely outcome, in which there would likely be no payment of redress liabilities," NSF said.