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Amigo looking to raise £300m under new scheme

Amigo is to ask its creditors to vote for two distinct schemes of arrangement, the guarantor loans firm has confirmed.

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The first is the “new business scheme”, which is contingent on new lending restarting and the firm completing a successful equity raise. The second would be a “wind-down scheme”, which would see a managed wind-down of Amigo Loans as a business under a scheme framework.


These proposed schemes come after “extensive negotiations” between the firm’s board and its Independent Customer Committee (ICC). The ICC has confirmed its preference for the new business scheme, sharing the board’s view that it will provide creditors with greater returns than the wind-down scheme.


If both the new business and wind-down schemes are approved by creditors, it then intends to submit them to the high court for sanction, with it being first asked to consider the new business scheme for sanction before it considers the wind-down scheme.


The high court rejected Amigo’s proposals for a redress scheme in May, with Justice Miles issuing a ruling stating that he was “not satisfied that the court should sanction the scheme”.


Regulator the Financial Conduct Authority (FCA) also opposed the scheme, as it believed it was “inherently unfair” and “placed a disproportionate burden on customers” to keep the company afloat.


In its latest results, covering the first six months of the 2021/22 financial year, Amigo said the sanctioning of a new scheme of arrangement is becoming “increasingly urgent” to deal with the complaints liability.


This is because the expected volumes of complaints would exhaust the group’s liquid resources, leaving it with insufficient resources to repay its non-current borrowing as they fall due in January 2024.


In the event the high court sanctions this new business scheme, which was first put to the ICC on 12 November 2021, Amigo is proposing an initial cash contribution totalling £97m from internally generated resources.


The £97m would go alongside a further contribution of £15m, which is expected to be funded from a equity raise and new capital commitments of between £120m and £300m, of which it’s hoped to raise a minimum of £70m in new equity.


A practice statement letter explaining both the schemes stating the ICC’s preference will be sent to the FCA for review, with Amigo hoping to send the finalised practice statement letter to customers before the end of 2021.


Amigo has also agreed with the ICC that the total net new lending under the new business scheme will not be more than £35m until the conditions have been met and £112m has been paid into the scheme fund.


Commenting on the news, Amigo’s chief executive Gary Jennison said: “We are pleased that the ICC has confirmed its preference for our new business scheme and that we can now take the next step to achieve a way forward for Amigo’s creditors and other stakeholders.


“We have listened carefully to its views over a number of months, alongside addressing the concerns raised by the high court and the regulator last May, and I would like to thank its members for the considerable time and commitment they have shown in helping us seek a fair outcome for all creditors.


"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."

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