AIB moves on distressed UK debt management group

AIB has pulled financial support to a distressed London-listed firm whose main business is to help troubled borrowers navigate their financial difficulties.

Lancashire-based Fairpoint Group said on Monday that AIB's UK subsidiary had "assigned" debt it owes the bank to a company called Doorway Capital. Doorway Capital, a specialist provider of capital to law firms, appears mainly interested in shoring up the Fairpoint's legal services business, Simpson Millar, and has provided £5 million of working capital to the division.

It is understood that AIB Group (UK) originally agreed a £20 million (€22.8 million) facility with Fairpoint in 2014, before increasing it to £25 million a year later. At the end of December, the AIB facility stood at £23.4 million.

Fairpoint, set up 20 years ago, has issued a number of profit warnings in the past year amid low personal insolvency levels, affecting its business in drawing up individual voluntary arrangements (IVA) for insolvent individuals to pay back part or all of their debts over time and avoiding the need to enter bankruptcy.

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The Bank of England has repeatedly warned of rising personal debt in the UK, with data published last week showing that unsecured credit rose by 10.3 per cent in the year to May, or five times as fast as the growth rate of earnings. However, this has yet to materialise in an oft-predicted surge in insolvencies.

Legal services

Meanwhile, Fairpoint’s legal services unit has had its own issues. In February, the UK government announced draft legislation, which would cap the level of compensation resulting from road traffic accident claims. “Essentially, the changes mean that law firms will not be able to recover costs in affected cases from the losing party/insurer,” Fairpoint said at the time.

It is believed AIB has been in talks with Fairpoint since early December when it issued a warning that its full-year results “are likely to be materially below market expectations”.

The firm repeatedly delayed the publication of its 2016 results as negotiations with AIB continued. However, Fairpoint revealed last week that AIB was no longer willing to provide ongoing support and that the group was unable to sign off on the audit of its annual report, triggering a suspension of trading in the stock, listed on London’s junior AIM market.

A spokesman for AIB declined to comment on the matter, while a spokesman for Fairpoint declined to comment beyond the stock exchange statement on Monday.

Doorway Capital executive Steve Din said the firm has been asked by Fairpoint “to look at a number of restructuring options relating to the group as a whole, which options we now studying very carefully”. He declined to comment further.

Meanwhile, Garry Greenwood, an analyst with Shore Capital, which is a broker to Fairpoint, said the Doorway deal shows that Fairpoint’s legal services unit remains “viable”. “We now look for the group to work with Doorway to find a permanent solution to its funding problem, which in turn would put the group in a position to publish its year-end accounts and thus allow its shares to resume trading,” he said.