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Troubled Times for Paragon

Paragon the provider of buy-to-let home loans is struggling to refinance it's loans as credit supply for the industry remains difficult to obtain.

Paragon needed to renew its £280 million corporate loan facility but could only find terms that it judged to be unattractive.

Even though profits for the business had increased by 9% in the previous year, difficulties in the supply of cash for the types of loans it specialises in, will be a huge blow to the company's fortunes going forward. Paragon may now have to turn to a rights issues to raise the cash. Without arrangements for wholesale loans at the right levels, the business it writes in the buy-to-let and sub-prime lending sectors will suffer.

Another threat appeared on the horizon yesterday when HBOS said it was gearing up it's Birmingham Midshires arm to enter the buy-to-let market and would aim to provide cheap loans for buy-to-let premises that would be very attractive and could fight head to head with similar products from Paragon.

That news from HBOS or perhaps further details on Paragon's own financial worries caused additional falls in Paragon's share price, with an extra 20% being trimmed from their value, however these are fickle times in the loans market and today (21/11/07) Paragon shares have already recovered most of yesterday's fall.

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