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Summary
- The Financial Conduct Authority is all set to oppose Amigo Holdings Plc’s rescue scheme.
- A majority of Amigo’s creditors have voted in favour of the scheme, though FCA has said the proposal in its current form was not fair.
- Amigo Holdings Plc shares were down by over 25 per cent after the news
The shares of Amigo Holdings Plc (LON:AMGO) fell by over 25 per cent in the afternoon trade on Tuesday as the Financial Conduct Authority (FCA) confirmed that it would oppose the firm’s rescue scheme. The FCA said that scheme in its current form was not fair. Apparently, most Amigo’s creditors (almost 95 per cent) have voted in favour of the scheme through votes cast via an online portal. Additionally, the rescue plan needs a go-ahead from the court, which will hear the case on 19 May.
In case it is passed, the rescue scheme would see creditors get paid less compensation for mis-selling than it actually owed. The lender said that it would go insolvent because of mis-selling compensation in case the rescue scheme does not go through. If that happens, the claimants would be liable to receive zero cash payments. The company management said that it was focused on the turnaround of Amigo.
The company is a prominent provider of guarantor loans across Britain. At 1.14 PM, Amigo shares (LON:AMGO) were down 25.36 per cent at GBX 22.02. The stock had a market capitalisation of £140.22 million at that time.
Also Read: How has Amigo Holdings managed to sustain its business amid the rising Covid-19 payment holidays?
The FCA’s concern
The main concern of the financial authority is that while the creditors' claims would get significantly lowered with the rescue plan, other stakeholders were not being asked to contribute. At the same time, FCA clarified that in case the Court gave the scheme a pass, it would not take any additional regulatory action.
At the beginning of 2021, the lender had come on the verge of a collapse amid a deluge of mis-selling complaints. In fact, by the end of February, the FCA had received 15,052 open complaints about the same.
Also Read: Amigo Holdings Plc not to offer fresh loans until next year
Creditor voting
The online voting process reported 74,866 votes in favour of and 3,862 votes against Amigo Holdings’ rescue scheme. Additionally, a virtual meeting is scheduled to be held on 12 May for those borrowers who had not voted online.
Despite receiving a majority vote, the scheme needs a Court sanction to become effective. The company’s scheme update stated that a sum of £15.0 million in cash would be made available in the first go for claims under the rescue scheme.
Also Read: How would Amigo Holdings recover from weaker lending activity due to Covid-19 pandemic?
3rd quarter results
Amigo’s financial results for the nine-month period ending 31 December 2020 said that the company made a revenue of £137.5 million for the period, down 36.9 per cent from the corresponding period in 2019. It ended up making a loss before tax worth £81.3 million.
The basic EPS for the period was 18.3 pence, down 288.7 per cent as compared to the same period a year ago.
The group’s total number of customers fell by 32.8 per cent for the nine-month period to 156,000. Its net borrowings rose by 22.2 per cent for the three quarters of 2020.
