A pack of hedge funds is closing in on a takeover of BrightHouse, Britain’s biggest rent-to-own retailer, just days after it was slapped with a £15m compensation bill by the City watchdog.
Sky News has learnt that BrightHouse’s bondholders have set an informal deadline of 6 November to strike a deal to restructure its balance sheet.
While adhering to that timetable may not be feasible, their move underlines the increasing likelihood of a change of control at the high street business, which rents household appliances such as refrigerators and televisions at its nationwide network of nearly 300 outlets.
BrightHouse has been through a torrid period, with mounting losses resulting from growing regulatory scrutiny.
Last week, the Financial Conduct Authority (FCA) ordered it to repay nearly 250,000 customers for failing to act as a “responsible lender”.
More than 80,000 people had not been properly assessed by BrightHouse for their ability to repay their loans, which accrue interest at such a rate that the cheapest washing machine available to customers ended up costing them more than £1,000.
The FCA’s authorisation will be required before the change of control at BrightHouse can take place.
The company’s bondholders nevertheless believe a recovery is possible.
Under their plans, which are led by Alteri Investors – a unit of Apollo Management which holds roughly 30% of the company’s bonds – the consortium of investors would exchange about half of its existing £220m of debt for equity.
The remainder of the existing debt, which matures next May, would remain on BrightHouse’s balance sheet.
Alteri has reached an agreement in principle with the other major bondholders, which include Highbridge Capital Management, HSBC and Oceanwood Capital Management, according to City sources.
The insiders added the bondholders had presented an outline of their proposals to BrightHouse’s board and to Vision Capital, the private equity firm which is its existing majority shareholder.
While a deal will not be formally struck with BrightHouse or Vision by the beginning of next week, the hedge funds are confident of reaching an eventual agreement with them.
Sources suggested that “formal talks” were not yet underway between the different stakeholders.
Vision is likely to emerge from a restructuring deal with, at most, a sliver of BrightHouse’s shares.
Advisers to BrightHouse launched a formal sale process for the struggling company on Monday by reaching out to prospective buyers, although few observers expect anyone other than the bondholders to gain control of the company.
It is not the only rent-to-own retailer to have run into trouble.
Buy As You View, another large player in the market, collapsed into administration last month.
Hamish Paton, BrightHouse’s chief executive, said last month that his team was “making progress in returning the business to growth”.
BrightHouse, which is being advised by bankers at Rothschild, declined to comment on Monday.
PJT Partners is advising the bulk of the bondholders.