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Subprime lender Cattles today issued its third profits warning in three weeks, said it had breached its banking covenants and suspended another three senior executives.
The firm, which makes unsecured loans and offers car finance to people with poor credit histories, called in forensic accountants Deloitte and lawyers Freshfield to examine the books of its main subsidiary Welcome Finance.
That uncovered "a breakdown in internal controls" which saw Welcome's policy on writing down bad loans "being applied incorrectly".
This meant that Cattles did not know just how many bad loans it had on its books.
Having twice said profits for 2008 would be "substantially lower" than market expectations, Cattles admitted today that things were far worse and not only had it made a "significant loss" last year, but it would also have to restate its figures for 2007.
Last week the group suspended three executives at Welcome.
Now it has suspended another as well as the parent company's finance director James Corr and chief operating officer Ian Cummine.
Cattles believed it was "in breach of covenants under its borrowing arrangements and will therefore be seeking appropriate waivers from its relevant debt providers".
The group has a £500 million loan which falls due in July and is already in intense negotiations with its banks.
Welcome used to advertise widely but has now stopped making new loans.
Its 550,000 customers tend to have unsecured loans averaging £2300 or hire purchase deals on second-hand cars averaging about £9800.
At the end of last June, Cattles had outstanding loans to customers totalling some £2 billion.
Cattles shares, which have lost more than 99% of their value in the past 12 months, fell another 0.35p to 2.1p.
The group raised £200 million of new capital last year through a rights issue at 128p a share.
Cattles said the forensic review had "made significant progress" and its publication was days away, according to source close to the company.
