Amigo plunges 53% after High Court rejects rescue plan

High Court rejects lender’s insolvency explanation

Amigo, one of the UK’s best-known providers of guarantor loans, saw its share price sink by more than 50% on Tuesday after the High Court rejected its rescue plea.

Plagued by a slew of historic mis-selling complaints, the sub-prime lender had appealed to the courts to allow it to limit compensation payments, describing the plan as central to its future survival.

The company had argued that 95% of customers who had been mis-sold loans and were entitled to compensation had been in favour of the scheme.

However, the High Court said it felt that the roughly one million past and current customers had not been given sufficient information to make an informed decision on the proposal.

FCA intervention decisive

This followed last week’s intervention by Britain’s financial regulator, the Financial Conduct Authority (FCA), which argued that the compensation now promised to Amigo’s borrowers was extremely meagre.

Mr Justice Miles said he accepted that “some form of restructuring of the group is clearly desirable and indeed needed”.

But he added: “I have accepted the submissions of the FCA that the creditors lacked the necessary information or experience to enable them properly to appreciate the alternative options reasonably available to them; or to understand the basis on which they were being asked by Amigo to sacrifice the great bulk of their redress claims, while the Amigo shareholders were to be allowed to retain their stake.”

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Amigo’s response

Responding to the judgement, Amigo CEO Gary Jennison said the company was “incredibly disappointed” and again pointed to the overwhelming acceptance of the scheme by those customers who had voted on it.

He added: “We are currently reviewing all our options and will provide an update at the earliest opportunity.”

In the run-up to Tuesday’s proceedings, Jennison had argued that a judgment against Amigo would result in its insolvency.

Mr Justice Miles rejected such an immediate eventuality, however. “The FCA submitted (and I agree) that it is unlikely that the directors would put the group straight into administration and destroy the substantial surplus value of the enterprise," he said. "There is nothing in the evidence to suggest any imminent cash-flow event that would force Amigo into insolvency.”

By mid-afternoon, Amigo traded down 53.44% at 8.67 pence, almost 98% below the all-time high it enjoyed shortly after its June 2018 IPO.

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