Goldman-backed Neyber lines up administrators

Sky News has learnt that Neyber, which enables employees of blue-chip companies like Royal Mail and TalkTalk to borrow money against their salaries, is in discussions with BDO, the accountancy firm, about a range of strategic options.

Sources said on Thursday that one possible outcome was a “pre-pack” sale, in which a buyer is lined up for a company’s assets before the appointment of administrators.

Under that scenario, Salary Finance, a competitor to Neyber backed by Legal & General, would be the favourite to acquire Neyber’s loan portfolio and potentially other assets, according to an insider.

A solvent capital-raising or sale remains possible.

If Neyber is forced to appoint administrators, however, it would be a blow to Goldman’s reputation as a shrewd investor in technology start-ups.

The Wall Street bank backed Neyber through one of its private capital funds in 2017.

The investment comprised a small sum in equity and between £70m and £100m in debt drawn down by the Neyber vehicles which issue loans to consumers, according to insiders.

One source said Goldman’s current shareholding in Neyber was “less than 5%”.

Neyber has been beset by a series of difficulties in recent weeks as it has sought to raise millions of pounds of fresh equity to stay afloat.

A number of customers have complained that previously approved loans have been cancelled without explanation.

In responses posted on Trustpilot, the consumer reviews portal, Neyber said it had “made some operational changes in recent weeks and unfortunately this has had a negative impact on our customers’ borrowing experience”.

When contacted by phone on Thursday, a Neyber employee confirmed that the company had halted making new loans, saying that it hoped the hiatus “would only be for a few weeks”.

Neyber refused to disclose details of its “operational changes” and in an emailed response to enquiries from Sky News, its co-founder Monica Kalia said only that the suggestions of financial distress were “factually incorrect”.

Last week, Ms Kalia described Neyber as “a thriving and ongoing business with over 2 million customers”.

She wrote in an email to Sky News: “As a growing business, we are currently closing the funding for next phase of our development.”

Financial watchdogs are said to be monitoring the situation at Neyber, which is regulated by the Financial Conduct Authority.

Police Mutual, which provides financial services to thousands of serving and retired police officers across Britain, is Neyber’s founding client and a substantial shareholder in the company.

It faces significant losses if Neyber does fall into insolvency proceedings.

Salary Finance is now understood to be conducting due diligence on Neyber’s loan book to determine whether the purchase of its assets makes sense.

Neyber was founded in 2013 by a trio of bankers including Ms Kalia and Martin Ijaha – both of whom previously worked at Goldman.

Last week, Sky News reported details of a presentation circulated to prospective investors outlined a 10 February target date for completing a recapitalisation of Neyber.

Mr Ijaha insisted that the presentation was “nothing to do with me” when he was asked about it.

The document, which is dated 2019, suggested that the company required £5m of new equity to be invested alongside £8m already committed by management and existing shareholders.

To underline the apparently troubled state of Neyber’s finances, it indicated that – inclusive of the £13m of new money – the company would be valued at just £23m after a fundraising.

Neyber has built a respected reputation among its broad base of corporate partners, which according to its investor presentation include Tata Steel Europe and TalkTalk.

Others include Asda, Bupa and Harrods.

The fintech company has a total addressable customer base of more than 2 million people – equivalent to 7% of the UK’s working population.

It claims to have so far lent £190m to the employees of its 500 partners, and says its average loan size is just over £8000.

Since launching, Neyber – which describes itself as “the UK’s number one financial wellbeing provider” – has positioned itself as a cheaper consumer alternative to credit card companies and payday loan providers.

It utilises internal employee benefit systems, and offers an APR – or interest – rate on its loans ranging from 3.9% to 18.9%, with an average term of four years.

Loans are then repaid directly from customers’ salary payments – a mechanism that Neyber claims significantly reduces default rates.

Neyber’s other major shareholders include Wadhawan Global Capital, which is also a significant backer of Zopa, the peer-to-peer lender which is in the process of securing a full banking licence from the City regulator.

Earlier this month, it was reported that Kapil Wadhawan, the investor’s chairman, had resigned from Zopa’s board after being arrested in India in connection with a money-laundering investigation.

Neyber has won a number of prominent awards for its approach to helping consumers tackle problem debts.

Its acquisition of blue-chip clients have come during a period in which the treatment of persistently indebted customers by mainstream banks has come under intense regulatory scrutiny.

Payday lenders have also seen their fortunes rise and fall, with major providers such as Wonga and QuickQuid disappearing in the wake of a cap on charges.

The launch of salary-deducted consumer loan providers has formed one attempt to fill this gap, although self-styled ethical providers like Neyber have, nevertheless, struggled financially.

Accounts filed at Companies House for the period to 31 March, 2018, show that Neyber Limited made a loss of nearly £16m, in addition to a loss of almost £7m the previous year.

Its auditor, Nexis Smith & Williamson, said its going concern opinion was dependent upon its ability to continue raising capital.

BDO, Goldman, and Legal & General all declined to comment.