Amigo Loans shares dive again as sub-prime lender almost trebles business rescue package to £97m
- Amigo says £97m of cash generated ‘from internally generated resources’
- Further contribution of £15m will be on offer from an equity and capital raise
- Creditors will soon vote on rescue plan or business wind-down
Amigo Loans shares dived this morning after the embattled sub-prime lender announced it was substantially boosting its contribution under a new business rescue proposal.
It has revised its contribution from £35million to £97million ‘from internally generated resources’, while a further contribution of £15million will be on offer from a previously announced equity and capital raise.
The lender says business continuation is dependent on the restart of its lending operations as well as securing money through the equity raise, while a second option would see a managed wind-down of its guarantor loans business.
Amigo Loans: Boss Gary Jennison says the ‘complex’ plan ‘provides no perfect path for either creditors or existing shareholders’
The future of Amigo, which used to lend to people who failed to secure a loan from mainstream banks before it halted new loans, is set for a showdown with creditors, who will be asked to vote on each of the options
The Independent Customer Committee, which is said to have a preference for the business continuity option, will be asked to consider the new business scheme for sanction if approved by creditors.
If the ICC does not sanction the scheme, it will be asked to sanction the wind-down scheme as a fall-back.
The new proposals come after London’s High Court in May rejected Amigo’s previous plan that would have cut compensation payouts to customers who had complained about the company mis-selling loans to them.
Amigo also said that the Financial Conduct Authority had informed the lender that it might impose a requirement on its regulatory permissions, which could restrict the company from continuing its business.
Shares in Amigo are down by 18.8 per cent this morning to 6.25p.
Gary Jennison, chief executive of Amigo, said: ‘We modelled our first Scheme proposal based upon forecasts of a severe impact from Covid-19 upon our business.
‘In the event, Amigo’s trading performance in terms of collections and impairments has been better than expected throughout 2021 and the size of the loan book has roughly halved in that time with a further 12 months’ worth of collections.
‘Therefore, although the business remains insolvent, Amigo is in a position where it can contribute a significantly higher sum to those creditors due redress should we be able to secure their support, the approval of the Court and then subsequently complete a successful equity raise.
‘This is a complex process which, given our financial position, provides no perfect path for either creditors or existing shareholders but we are an important step closer today to addressing the historic lending issues we face.’
Last week Amigo Loans shares fell after the sub-prime lender announced its planned equity raise as part of a rescue plan that would heavily dilute shareholders’ stakes.
Amigo reiterated that the unless the new compensation plan and equity raise are approved by regulators, the business will go bust.
It fell foul of regulators last year when rule changes surrounding affordability checks meant thousands of customers could claim they had been mis-sold their loans.
It now has a complaints bill of £344.3million, which it cannot cover.
Amigo made a profit of £2.1million, in the six months to September, up from a loss of £62.6million last year.
The lender’s shares are down 77 per cent since May and 97.8 per cent since their peak in 2019.