Shares of UK guarantor lender Amigo Holdings PLC (LON: AMGO) crashed 15.6% after announcing a new scheme to address the thousands of claims the company faces from aggrieved customers and compensating qualifying claims.
The scheme is known as LL Scheme Ltd (“SchemeCo”). It is a wholly-owned subsidiary of the company that will operate as a separate legal as part of its proposal to apply for a Scheme of Arrangement under Part 26 of the Companies Act 2006.
The new entity is a bold move by the company since it is yet to receive approval from the UK’s Financial Conduct Authority (FCA), which is still conducting an in-depth analysis of the terms under which the scheme proposes to operate.
The lender withdrew its application for a “letter of non-objection” from the FCA.
Amigo also notified the public that the FCA might object to part of the scheme placing restrictions on its ability to conduct its business in future, which could lead to the company filing for insolvency.
The lender also warned that the scheme’s failure could mean that the aggrieved customers would end up receiving zero cash instead of a share of the £15 million to £35 million allocated to the scheme and the 15% pretax profit committed to the scheme for the next four years.
The lender also issued an update on the COVID-19 payment holidays as at 31st December 2020 with the number of payment plans shrinking to about 13,000 as 42,000 plans ended and 7,000 were settled.
Gary Jennison, CEO of Amigo, said: “Amigo faces very serious challenges from historic lending to customers. The new management team has a strong commitment to do what is best for our customers and our other stakeholders. We will continue to work cooperatively, constructively and transparently with our regulator, the FCA, as we discuss the Scheme and its detailed terms.”
The CEO reiterated the firm’s commitment to serving the “10-12 million UK adults who face financial exclusion” from the mainstream banking sector and “need firms like Amigo to provide fair and affordable credit.”
Amigo Loans share price.
Amigo shares crashed 15.62% to trade at 7.09p having fallen from Friday’s closing price of 8.40p.
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