Elevate Credit’s administrators look to sell loan book

At the end of June, US-based alternative lender Elevate Credit, Inc. announced that its UK subsidiary ECIL had gone into administration. Ed Boyle and David Pike of KPMG have been appointed as joint administrators.

KPMG confirmed that they are assessing all potential options for the business and its assets, including the sale of the customer loan book.

Documents on Companies House also show the termination of Charles Scott Greever, Jason Harvison and Steve Martin Grice as ECIL directors earlier this month and at the end of June. Sunny employed around 143 staff in the UK and at the end of June, the administrators confirmed they had made 32 redundancies.

ECIL provided loans under the brand Sunny, and while all new lending has ceased, it continues to collect from its 50,000 customers.

According to the administrators, the business had been under sustained financial pressure for some time, which had been exacerbated by the current crisis. 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.

Jason Harvison, president and chief executive of Elevate, said: “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.”

He added: “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.”

Documents on Companies House show how profits had dropped by a large amount since 2017. They show that pre-tax profit had decreased to £78,000 for the 2018 calendar year, from more than £5m in 2017. After tax, this number further decreased by more than 99% to just £9,822, compared with 2017.

The latest available full-year accounts, which are for the 2018 calendar year, show that Elevate had taken on 100,000 new customers during 2018, and had 20% of market share in the UK at the time.

The parent company will now recognise an estimated loss on its investment in ECIL of approximately $10m. After recognising this estimated net impairment loss, the US parent’s only remaining material exposure to ECIL will be its guarantee of ECIL’s repayment of its outstanding debt, which was approximately £10.2m as of June 29, 2020.

As of May 31, 2020, ECIL’s cash balances totalled over £11m with the book value of loans receivable, net of the allowance for loan losses totalling over £11m. Elevate expects ECIL to completely repay its outstanding debt obligation by the end of this year.

A statement from the parent company stated that it will deconsolidate ECIL as of June 29, 2020 and will present ECIL in its results as discontinued operations, starting in the second quarter of 2020.