Amigo Loans is set to close after being informed that raising additional capital in the current market is unlikely.
The Bournemouth-based guaranteed loan provider has been dealing with mis-selling claims for the past two years, resulting in a £97mln fund being created to pay off its claimants.
However, this fund is unaffected by the recent decision. Amigo Loans will now resort to its “fallback” solution due to a lack of new funds. Its subsidiary will immediately cease lending and undergo an orderly wind-down process, with any surplus assets transferred to the creditor scheme.
In the City, shares in sub-prime lender #Amigo have plunged by 90% to almost zero after it revealed this morning that efforts to restructure its business have failed #AMGO
— Share_Talk ™ (@Share_Talk) March 23, 2023
All assets will be liquidated in due course, and the shares in the company will be of no value. The existing loan book will continue to be collected during the wind-down process and last for approximately 12 months.
Danny Malone, the CEO, expressed his sadness for the employees who have worked hard to rebuild a new Amigo after addressing historic lending issues. He stated that a successful scheme providing a fair financial offer to Scheme creditors was the only way shareholders could retain any value for their shares. However, the economic and market environment has significantly changed since the scheme was sanctioned in May 2022.
The company’s bosses have determined that it is “highly unlikely” for them to raise funds from new investors to support repayments and maintain operations. As a result, the business will be liquidated over the next year. The bosses have stated that they have not received sufficient interest from potential investors to cover the total amount needed.
In the coming days, staff will be consulted. The company’s priority now is to conduct an organized wind-down of both the Amigo Loans Ltd business and the wider group within the next 12 months. Their aim is to maximize returns for scheme creditors and take care of their employees during the process.
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