Amigo scrambles for survival as £45m emergency cash talks fail
Beleaguered lender Amigo Loans is scrambling to find a route to survival today after the firm revealed talks to raise £45m had failed this week.
In an update on an emergency cash raise this morning, Amigo said it was now “unlikely” to raise the required money before a regulator-imposed deadline of the 26th May this year and it was now looking to draw up alternative routes forward.
“Unfortunately, following extensive engagement with a large base of potential investors since commencing a marketing process in October 2022, ongoing conversations with potential equity investors over providing the full publicly stated equity capital requirement of £45m concluded on Wednesday evening, and the Company has not received sufficient aggregate indications of interest to cover the total amount,” Amigo said today.
“Whilst the Board continues to remain open to proposals, it believes that this target is unlikely to be achieved by 26 May 2023 to allow the continuation of the business under the terms of the Preferred Solution.”
Amigo said it had “indications of interest” in equity capital subscriptions to fund £21m, made up of £11m in ordinary share capital and £10m in exchangeable notes.
The Bournemouth-based sub-prime lender has been on a survival footing since it was suspended from lending by the Financial Conduct Authority after failing to conduct proper affordability checks and for dishing out high-interest loans to borrowers with shaky credit histories.
Amigo secured high court approval for a redress scheme last year and was given the green light from the FCA to restart lending in October. Under the terms of the scheme, the firm was required to raise £45m from investors.
In a meeting with shareholders on Wednesday, prior to the failure of talks, bosses said after approaching 200 potential backers it had failed to secure the required cash, and warned that a “fallback solution” of an orderly wind-down of the business was the only viable alternative if investors failed to materialise.
Amigo said today it was now exploring whether a potential new scheme that eliminated the £15m capital committed to its creditors was likely to succeed, however. Such a scheme would reduce the required £45m to approximately £27m, Amigo said, but any new scheme would require approval by the High Court and by creditors. Amigo added that it was “currently engaged with the FCA”.
Danny Malone, chief of Amigo said “minds remain focused on a go forward solution for the company where existing shareholders retain some value but where Scheme creditors can benefit beyond the Fallback Solution[ a winding down of the firm]”.
“This is a very challenging situation and the board may conclude that another new scheme is not feasible, but we believe it is important to explore fully and swiftly before reaching a conclusion,” Malone added.