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Fitch: No Impact on Provident's Ratings from Moneybarn Acquisition
August 14, 2014 / 3:21 PM / in 3 years

Fitch: No Impact on Provident's Ratings from Moneybarn Acquisition

(The following statement was released by the rating agency) LONDON, August 14 (Fitch) Fitch Ratings says there is no impact on Provident Financial plc's (Provident, BBB/Negative) ratings following its acquisition of car finance company, Duncton Group Limited (Duncton or Moneybarn), which operates under the Moneybarn brand. The acquisition will be financed by raising fresh equity, neutralising the impact on the group's capitalisation from the large goodwill generated on acquisition. However, the acquisition supports Fitch's belief that there are risks arising from the company's continuing diversification away from its traditional home-collected credit model. Its risk profile is changing with the move to a different customer set, albeit all within the non-standard category. Fitch revised the Outlook on Provident's Long-term IDR to Negative from Stable on 5 June 2014 (see 'Fitch Revises Provident Financial plc's Outlook to Negative, Affirms at 'BBB'' at www.fitchratings.com) as a result of Provident's fast-growing diversification, originally towards the sub-prime credit card lending operations of Vanquis Bank. The diversification away from its traditional mature market is continuing through the acquisition of Moneybarn. The newly-acquired company is small compared with Provident's balance sheet, and the impact on its capitalisation broadly neutral. However, Fitch will continue to monitor the company's expansion into this field, and assess the resulting change, if any, in risk management and controls, loan concentration, risk-adjusted returns or capitalisation. Provident is acquiring 100% of the issued share capital of Duncton for a total consideration of GBP120m, excluding transaction fees and other costs. To finance the acquisition, the group has simultaneously raised GBP120m of equity (before fees). Moneybarn provides second-hand car finance to non-standard borrowers in the UK. Loans are provided for up to four years, in the range of GBP5,000-GBP25,000 and secured on the vehicle. Moneybarn reported profit before tax of GBP5.5m and net receivables of GBP128.5m for the year ended 31 December 2013 under UK GAAP. The acquisition is estimated to generate around GBP129m of goodwill and other intangibles for Provident. Contact: Maria Rivas Director +44 20 3530 1163 Fitch Ratings Limited 30 North Colonnade London E14 5GN Natalia Shakhina Analyst +44 20 3530 1577 Media Relations: Elaine Bailey, London, Tel: +44 203 530 1153, Email: elaine.bailey@fitchratings.com. Additional information is available at www.fitchratings.com. ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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