The Amigo Holdings PLC (LON: AMGO) share price fell 10% after issuing an update saying that it was yet to find enough backers to meet the £45 million target set by the company to fulfil the mandatory 19:1 capital raise, which is part of the Scheme of Arrangement approved by the High Court.
YOUR CAPITAL IS AT RISK. 76% OF RETAIL CFD ACCOUNTS LOSE MONEY.
Investors were disappointed to hear that the lender had still not secured enough commitments to meet its £45 million target after the last update on 16 January 2023 when it appealed to institutional investors interested in backing the firm to register their interest with its brokers.
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YOUR CAPITAL IS AT RISK. 76% OF RETAIL CFD ACCOUNTS LOSE MONEY
Amigo’s board reiterated that if the company could not raise the much-needed funds by 26 May 2023, it would have to revert to its fallback plan. The orderly wind-down of its business would result in its ordinary shareholders receiving nothing in return for their shares.
There is still hope that Amigo will raise the funds it needs, but the situation seems dire. The lender could be looking at potential liquidation if it cannot raise funds on time. The biggest losers in such a case would be the ordinary shareholders, as the secured noteholders will have priority in terms of being compensated.
Amigo’s board reassured investors that it was committed to ensuring the best possible outcome for employees, creditors, shareholders and other stakeholders. The board said Amigo’s cash position remains strong enough to compensate the secured creditors.
Additionally, the company noted its Pilot lending program under the RewardRate program had gained momentum in January and that it was on track to originate loans worth about £1 million. The company noted that loan originations would increase as it improves the conversion rate based on its learnings through the pilot program.
Amigo is still cautious about loan originations, given the cost-of-living crisis and affordability concerns. The lending system is now being tested by a Skilled person who will produce a definitive assessment once they are done reviewing the system.
*This is not investment advice.
Amigo share price chart.
The Amigo share price fell 15.36% to trade at 2.37p, from Thursday’s closing price of 2.80p.
YOUR CAPITAL IS AT RISK. 76% OF RETAIL CFD ACCOUNTS LOSE MONEY.