In a London Stock Exchange trading update last Thursday the firm revealed that its current funding will be exhausted on April 12 and it will cease accepting new business from February 27, allowing it to manage pipeline business.
In a statement to brokers, John Webb, managing director of Paragon’s secured loans division Paragon Personal Finance, says: “I know that you will be desperately disappointed by this news but please be reassured that PPF strongly believes in the future of secured lending and remains fully committed to the market.”
Matt Tristram, director of Loans Warehouse, says: “Paragon’s withdrawal, which is hopefully temporary, is a massive blow. It offered the lowest headline APR in the industry and its service has always been market-leading.
“Our fingers are firmly crossed that it manages to secure funding.”
In its update the group revealed that Paragon Mortgages has bought the remaining stake in buy-to-let and commercial mortgage broker The Business Mortgage Company.
It bought a 33% stake in TBMC for £15.7m in January 2007. Since then TBMC has been included in Paragon’s accounts as an associated company. In 2007 it showed assets of £17.9m and profits before tax of £100,000.
But with the significant down-turn in market activity in 2008, Paragon says TBMC’s business suffered and the firm is likely to report a loss for the year.
As a result, it bought the remaining 67% stake from TBMC chief executive Andy Young and managing director Paul Rockett for “nil consideration”.
Young says: “We are delighted to have Paragon as a parent as it helps secure the future of TBMC and gives us a strong financial base.
“It’s business as usual as far as we are concerned and this move does not affect the day-to-day runn-ing of the business.”
The Paragon update adds: “To secure the future of this strategically important business channel for our buy-to-let business we agreed to temporarily suspend interest payments on our loan in exchange for the remaining equity.
“The group remains financially strong and continues to manage its portfolio carefully. While the wholesale markets remain closed, we welcome outline proposals from the government to reopen the securi-tisation markets.”
The group’s half-year results will be published in March.