Amigo Loans suspends all trading of its shares amid critical court hearing

Amigo Loans suspends all trading of its shares ahead of critical court hearing on compensation scheme

• Amigo’s preferred compensation scheme will give customers at least £112m
• The Bournemouth-based company has not lent money since November 2020

By Harry Wise For This Is Money

Published: 15:49 BST, 23 May 2022 | Updated: 16:12 BST, 23 May 2022

Trading in Amigo Holdings shares has been suspended ahead of a hearing that could determine the survival of the embattled payday lender.

The company said it took the measure due to concerns that the limited capacity of people allowed to attend the legal proceedings could lead to sensitive information being leaked before it had time to inform the markets.

Investors should be able to start purchasing shares in the group again pending the conclusion of the court hearing, which will see a judge decide whether a plan to indemnify those who were mis-sold loans by Amigo is approved.

No lending: Since late 2020, Amigo Loans has been unable to lend money after a deluge of complaints that it had sold loans to borrowers who could not repay them

Under Amigo’s preferred compensation scheme, customers will receive at least £112million between them, with £15million coming from issuing shares, though this could go up to £116million if they raise more than expected.

Creditors holding around 90 per cent of all loans voted in favour of the proposal at a meeting 11 days ago, and the Financial Conduct Authority (FCA) has said it would not attend the hearing to oppose or declare evidence regarding the scheme.

If the judgement goes the company’s way, it would then ask the FCA for permissions to start lending again, something it has not done since November 2020.

This followed uncertainty caused by the Covid-19 pandemic and a boatload of complaints from customers who believed they were sold loans they could not afford to repay.

But, should the court rule against Amigo, it will then ask the judge to accept an alternative offer known as the ‘fallback solution’, which was also approved by a majority of loanees on 22 May.

That proposal will see it halt all lending, pay all necessary expenses, and return surplus cash to creditors before eventually being liquidated.

It would mark a dramatic downfall for the firm, which has specialised in offering loans to those with poor credit scores as long as they have a ‘guarantor’ – usually a family member or friend – who could pay the bill if the creditor was unable to do so.

This business model has received major controversy because Amigo lent money to customers at interest rates of up to 49.9 per cent, leading some MPs to describe the group as a ‘legal loan shark.’ 

The company has often been compared to payday lenders Wonga, whose collapse in 2018 followed a surge in compensation claims and findings from the FCA that it had lent to people who lacked the ability to repay.

However, demand for the firm’s loans continued to grow, and it was valued at £1.3billion when it was listed on the London Stock Exchange in 2018, making its founder James Benamor one of the UK’s youngest billionaires. 

Since that time, Amigo Holdings shares have plummeted by over 97 per cent, and its current market capitalisation is now worth less than £30million. 

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