Amigo Loans shares drop on new £300 million rescue plan

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Tea

Robbled personal lender Amigo saw shares plunge further into penny territory today as the company announced plans to raise up to £300 million.

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Amigo is struggling to save itself from being burdened with compensation claims related to the historic mis-selling. The High Court had in May rejected plans to offer partial compensation, leaving Amigo on the verge of collapse.

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The company said today that it has submitted two new plans to a committee representing its 82,000 wrongfully sold customers: one to wind up the business and another to raise fresh cash and restart lending.

The committee has supported the plan to restart lending, which should make customers pay more for mis-selling. Amigo has promised an initial £113 million in redress payments, compared to just £35 million under the plan rejected in May.

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The payment will be partly funded by the better-than-expected performance of Amigo’s loan book during the pandemic, but will require fresh funding. Amigo plans to raise up to £300 million of debt and equity from new and existing investors. It is seeking at least £70 million in equity funding.

Amigo warned last week that investors were facing huge losses from hedge plans, causing stocks to crash. The stock – which is held by about 8000 retail investors – fell another 1p, or 13%, to 6.7p today.

Amigo cautioned that “many obstacles remain”. Wrongfully sold customers still need to vote on the proposals and the plan requires approval from the Financial Conduct Authority and the High Court, a process expected to take four months.

CEO Gary Jennison said: “This is a complex process that, given our financial position, offers no right-of-way to creditors or existing shareholders, but we are taking an important step today to address historic lending issues.” steps.”

Amigo’s woes stem from claims that it did not perform adequate affordability checks on its guarantor loans, which allow people to borrow money with a guarantee provided by a friend or family member.

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