Sub-prime lender seeks cash boost

Analysts say others may embark on rights issues

UK firm Cattles, which offers loans to risky borrowers, is seeking to raise £200m from shareholders to bolster its finances because of the credit crunch.

The move comes a day after Royal Bank of Scotland made a similar move to raise £12bn through a rights issue.

Cattles' rights issue means it will offer new shares at 128p - far cheaper than the previous day's closing price.

The firm said the year had started well but the credit crisis had shown the need for "diversified funding".

Analysts speculated on Tuesday that other banks and possibly building societies would follow the move by RBS.

WHAT IS A RIGHTS ISSUE? Companies issue extra shares to raise money They are offered to existing shareholders, usually at a discount to the current share price Shares are offered in proportion to existing holdings, so if you own 10% of the old shares you are offered 10% of the new ones

David Postings, the chief executive of Cattles, said: "The firm continues to be well funded and the rights issue provides a prudent platform for future growth."

In the wake of the US housing slowdown and a sharp rise in defaults among risky borrowers, it has become increasingly hard for banks to raise capital.

Cattles, which trades as Welcome Financial Services, aims to offer financial services to those without access to mainstream facilities.