Amigo Holdings LON:AMGO, the troubled subprime lender saw its shares crumble this morning (16th January), as it announced that it had been unsuccessful in finding a cornerstone investor for a recapitalisation.
The company opened trading today at 3p but had fallen nearly 40% to 2.28p in early trades, before recovering to around 3.1p by 11:00.The company has offered a year-to-date return of -30.9% and a one-year return of -45.3% with shares ranging between 1.6p and 10p over a 52-week period. The company initially priced at 275p on IPO in June 2018, giving the company a market capitalisation of GBP1.3bn. Its shares peaked at 315p later that year.
As previously reported Amigo has changed its management, giving CFO Danny Malone the top job in September who announced that he was focussed on a return to lending by February under the new brand of RewardRate.
Suspended lending
The company had suspended lending in March 2020 after a mis-selling scandal and FCA investigation. Since then – unsurprisingly – its loan book declined, and customer numbers dropped off a precipice.
The lender looked to be making some progress towards getting back into business and hoped that it would regain investor confidence when a High Court judge accepted its proposed new business scheme in May 2022. However, the company remained under a cloud of FCA investigation.
Since then, the new management team has been trying to paper over increasing cracks in the dam, whilst trying to put together a syndicate of investors to raise GBP45m – a 19:1 equity raise mandated by the High Court as part of the approved scheme of arrangement, that would provide compensation to previous customers, and give it the requisite capital buffer to start lending again.
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Lack of interest
It seems – according to today’s announcement – that it has not been successful. Malone said in a statement to shareholders published this morning: “… to-date [Amigo Holdings] has been unable to secure a commitment from a cornerstone investor to underwrite the whole of the capital raise… [we are] …therefore assessing whether there is sufficient interest for a syndicate of such investors to be formed in order to support a GBP45m capital raise.”
He blamed the current economic conditions for investors’ disinclination to participate in the capital raising exercise, but did claim: “Amigo has secured term sheets for debt facilities which it believes are capable of execution following further discussions with lenders,” and would be continuing the equity raise exercise.
However, things are looking bleak for the subprime lender. If it cannot hit its target, the firm would have to enter a ‘orderly wind-down’ of its operations, meaning that customers expecting compensation would miss out on at least GBP15m that would come from investors. The company claimed that GBP97m would still be available for compensation, but: “the higher-than-expected volume of complaints received in the [scheme of arrangement] will also impact the final pence in the pound received by […] creditors.”
The statement said that Amigo had been pilot testing a return to lending, but take-up had been disappointing due to the company taking a “cautious approach to underwriting given the prevailing market conditions” and raising affordability criteria.
