Struggling electricals chain BrightHouse submits reform plan to FCA

The struggling rent-to-own electricals chain BrightHouse has made a bid for survival by offering permanent reform of its controversial practices in talks with lending watchdogs.

The company, owned by private equity firm Vision Capital, has submitted a detailed business plan to the Financial Conduct Authority (FCA) in an attempt to ward off circling bondholders who are preparing for the worst.

The FCA is due to scrutinise the plan and assess whether BrightHouse should be allowed to continue to lend on the basis of it. The situation is increasingly urgent for the chain, with quarterly rent payments on its 311 stores looming at the end of March and its heavy debts due to be called in.

BrightHouse’s finances are under strain from temporary lending rules agreed with the FCA that force it to carry out more stringent checks on customers’ credit history before lending to them. The guidelines also bar it from issuing punitive late payment charges.

The regulator has cracked down on the hire purchase sector over alleged overcharging and hard-sell tactics targeting vulnerable consumers.

BrightHouse said last week it would shut 28 stores before the next rent demands are due, saying “part of our plan requires us to be leaner and more cost effective”.

The chain owes bondholders £220m in notes that are due for refinancing by next year. Bond investors fear BrightHouse will be denied a lending licence by the FCA or that the scrutiny process will take so long that it will prevent refinancing. City sources said they did not expect a decision from the FCA until the second quarter of the year.

Legal and financial advisers are jockeying for position on the potential restructuring, with Moelis and PWC understood to be seeking appointment by bondholders. BrightHouse is working with Rothschild and the City law firm Freshfields. A BrightHouse spokesman declined to comment.