A personal friend of mine, Chairman of iconic British brand name company, granted Lloyds Bank (LB) a Personal Guarantee (PG) on part of that company’s debt to LB. Allegedly, the assets of the company were many times the debt to LB. The Chairman was advised by the Bank this was a “token gesture”. Lawyers looked at the Guarantee and advised the Chairman it was the “standard form”.
Within four months LB received an offer for and then sold the debt to a “vulture fund” (VF) specialising in buying brand names. This was against the Chairman`s wishes. Allegedly, LB refused to listen to other offers to buy the debt.
The VF, now owning the debt, demanded and purchased the shares in the Company owned by the Chairman and his family.
The VF then carried out a rapid pre-pack, selling the company back to the VF, at an allegedly very low value.
The VF claimed to the Chairman his PG was now crystallized, and they, not LB owned it. They coerced him into waiving a service contract with a 10% holding of the company.
As with many other iconic brand companies purchased by this VF, the company has now gone through another insolvency process.
It seems this VF is better at using or abusing our insolvency rules and PGs than running iconic British brand companies, at a substantial cost to the UK`s brand name heritage. Supposedly just this brand was worth more than £100m.
Misusing the purpose of PGs was part of this process.
Perhaps, the ultimate misuse of PG’s was when NAMA sold several billions of loans to Cerberus for roughly 25% of face value.
Cerberus then sold these loans to the Guarantors for roughly 50% of the Guarantee value.
Cerberus made 100% gross profit on the transaction.
Signing a PG again is tantamount to signing a blank cheque. (https://thelawdictionary.org/personal-guarantee/)
When you sign a Guarantee you are not told it can be sold to a third party.
The secured lender has little or no responsibility to the Guarantor to collect the debts from the borrower before calling on the Guarantee.
Neither does any insolvency practitioner appointed by the secured lender have any worthwhile responsibility to the Guarantor to collect from the borrower before the Guarantee is called on.
It is not surprising that signing a Guarantee is the same as signing a blank cheque.
In my case, I took top legal advice and I signed a £500k Guarantee of “last resort” of the debt of Heritage plc.
The receivers appear to have collected £5m against a debt of £3m from Heritage plc to LB. My Guarantee was called on, but I have no idea where the missing recoveries are.
The Receivers have little “duty of care” to the Guarantor.
Further, in my case, LB appear to have entered a perjured Affidavit to claim a false £1.5m shortfall against the £3m debt to justify the call on my Guarantee.
The FSA investigated the Heritage recovery figure in 2008, but refuse to provide me with the result of that investigation.
My attempts to see that investigation through the Freedom of Information Act are now in the Court of Appeal and the Upper Tier Tribunal.
A PCP against the alleged perjurer is in a Bristol Court.
A PG is again a blank cheque. PGs need to be regulated.
Why did Hector Sants, when he was head of the FCA, resolve the PPI situation by bringing an action through the Courts? http://www.telegraph.co.uk/finance/personalfinance/insurance/8462864/PPI-banks-lose-battle-against-FSA.html
Why is Andrew Bailey attempting to put the PG situation under the FCA’s dust-laden carpet?
I suggest the UK urgently needs a Tribunal Service to look at the abuse of PGs.

Jeff Lampert

This blogpost is for information purposes and should not be relied upon as legal advice because it does not consider or take into account your own personal circumstances. If in doubt, seek legal advice.