Lifeline for Amigo? Shares in subprime lender rocket on potential investment from shareholder
Shares in Amigo surged after it agreed an exclusivity agreement with shareholder and financier Michael Fleming, raising the possibility of a debt investment in the subprime lender.
Exclusivity agreements mean borrowers can not obtain funds from any other source. Fleming’s period of exclusivity expires on 6 September this year.
Its shares were trading over 200 per cent higher early on Friday.
The controversial lender, which is currently in orderly wind down, acknowledged that there remain “significant impediments to any new capital being made available to the business.”
It recognised the “very low likelihood of a successful conclusion to any discussions” but said it was pursuing them in line with its duties to consider the interests of all stakeholders.
Completion of a deal would raise the possibility that a new entity could be formed. Establishing any new business in the longer term has “significant execution risks”, the subprime lender noted.
Amigo said the agreement will not stop the company progressing with the disposal of its assets under a wind-down plan. It noted under the wind down scheme there is “no expected residual value” for shareholders.
Amigo has been heading for a wind down since it stopped business at the end of March having failed to raise £15m in emergency cash.
The chief executive and director, Danny Malone, resigned from his role last month but is serving his 6-month notice period to ensure continuation of the wind-down.
According to the wind down, £97m will be offered to the firm’s creditors with a mechanism put in place to return excess cash to creditors of the scheme.
The subprime lender had been on life support since it was suspended from lending by the Financial Conduct Authority (FCA) in 2020 for failing to perform adequate checks on consumers it lent to.