No Amigos: Controversial credit shop Amigo struggling to raise cash, firm says
Shares in beleaguered credit firm Amigo plunged today after the firm said it was struggling to raise cash from investors ahead of a planned full return to lending this year.
Amigo, which in October got the greenlight from the Financial Conduct Authority (FCA) to resume operations following a loan mis-selling scandal, has been looking to raise £45m in equity investment as part of its restart efforts.
However, in a statement this morning, the firm said it had struggled to tempt in investors to fund its return.
“It is disappointing that we have so far been unable to identify the requisite equity backers for the business,” said Danny Malone, Amigo chief. “However, we are continuing with our efforts to put together an equity investor consortium as expeditiously as possible.”
He added that a number of investors were exploring a potential minority investment in the firm.
The announcement sent shares down over 40 per cent in early trading before they recovered to trade at around 3.1p at 10:11am, down nearly 19 per cent on their opening price.
The cash raising efforts come after Amigo was shut out of the market by regulators after being found to have mis-sold unaffordable loans to customers without proper affordability checks. Amigo tabled a redress scheme last year to divide at least £112m between borrowers which was sanctioned by the high court.
Amigo began a pilot return to lending in October in an attempt to iron out issues ahead of a full restart in May. However, the firm said this morning that uptake from customers had been minimal.
“While demand from both direct and indirect channels has been strong, volumes of loans paid out have been very limited,” Amigo said in a statement.
“This is due in part to an initial focus on testing and refining Amigo’s new technology platform and the processes in place. It also reflects the Company’s cautious approach to underwriting given the prevailing market conditions and, specifically, the impact on affordability for customers of the increased cost of living.”
The firm said last year that its customer base had almost halved despite its pledge to return to the market in full.