Elevate Credit ceases UK operations
US-based Elevate Credit, a provider of online credit solutions to non-prime consumers, is set to withdraw from the UK market effective 29 June 2020.
According to the company statement issued on Monday, Elevate Credit will no longer be operating its wholly-owned UK unit, Elevate Credit International Limited (ECIL).
ECIL provides consumer loans in the UK under the “Sunny” brand.
The ECIL board of directors placed the UK subsidiary in administration under the UK Insolvency Act 1986 and appointed insolvency practitioners from KPMG LLP to take control and management of the UK business.
Elevate had previously commented late last year, and again this year, that the lack of regulatory clarity in the UK would challenge the day-to-day operations of the Sunny brand. The onset of COVID-19 further complicated the environment, ultimately leading to the decision to place ECIL in administration.
“Regulators in the UK were unable to provide clarity that would allow Sunny to continue and sadly, the consumers’ choice for the most safe and reliable short-term credit option in the UK has ceased operations,” says Jason Harvison, president and CEO of Elevate.
“I would like to give my sincere thanks to all of our UK employees and the thousands of Sunny customers who trusted us over the years.”
ECIL’s entry into administration will place its business under the direct control of the administrator, KPMG.
Accordingly, Elevate will deconsolidate ECIL as of 29 June 2020 and will present ECIL as discontinued operations starting in the second quarter of 2020.
Upon deconsolidation of ECIL, Elevate will recognise an estimated net impairment loss on its investment in ECIL of approximately $10 million (which includes an estimated US federal tax benefit of $20 million, according to Elevate’s Form 8-K filing, which contains additional pro forma financial information).
After recognising this estimated net impairment loss, Elevate’s only remaining material exposure to ECIL will be its guarantee of ECIL’s repayment of its outstanding debt, which was approximately £10.2 million as of 29 June 2020.
As of 31 May 2020, ECIL’s cash balances totaled over £11 million with the book value of loans receivable, net of the allowance for loan losses totaling over £11 million as well. Elevate expects ECIL to completely repay its outstanding debt obligation by the end of this year.