Amigo Loans given FCA boost

The statement, sent by the FCA to the guarantor loans company at the end of last week, comes ahead of the schemes’ convening hearing in court - at which the regulator doesn’t currently intend to appear. It does, however, say it reserves its right to intervene - both generally and if the facts change. 

In addition to this, it expects to be kept informed about all the relevant matters relating to the process, including the details of any court hearings should the FCA wish to observe them. It also expects to be kept apprised of any material or potential developments in relation to the schemes or their terms. 

Towards the end of last year, Amigo outlined two new schemes of arrangement, after the high court rejected its proposals for a redress scheme in May. The first is the “new business scheme”, which is contingent on new lending restarting and the firm completing a successful equity raise. 

The “new business scheme” proposes an initial contribution of £97m, to be generated from internal resources, with a significant proportion being derived from the run-down of the existing loan book. 

It also includes a provision for an additional payment to redress creditors in the event the existing loan book generates a better return than currently anticipated. Additionally, it intends to raise capital - within one year of any potential sanctioning of the new business scheme by the court - to fund both the £15m scheme contribution and future lending. 

This new scheme would require the company to issue at least 19 new shares for every existing share of the business. This would leave existing shareholders with no more than five percent of its share capital, reflecting a UK market standard level of economic interest for equity holders where creditors are not being paid in full. 

The second proposed scheme would be a “wind down scheme”, which would see a managed wind down of Amigo Loans as a business under a scheme framework. The first court hearing for these new schemes will take place tomorrow (8 March), in which it will ask the high court for permission to invite customers to vote on the proposals. 

In relation to the firm’s proposed return to lending, the FCA says this remains ongoing - including its assessment as to whether the business is failing or is likely to fail to satisfy the regulator’s threshold conditions. 

And while earlier this year Amigo said it didn’t expect to resume lending until it had provided satisfactory evidence its revised approach to lending is compliant with FCA rules, the regulator has conducted an assessment of the firm’s proposed return to lending. 

Off the back of this, it has concluded - without prejudice to the ongoing enforcement investigation - the firm could return lending subject to the new business scheme being sanctioned by the court and it being satisfied the company meets FCA threshold conditions. 

It also wants to ensure the outcomes testing of its new lending system is completed to the satisfaction of the FCA, and that it’s dealing with - to the FCA’s satisfaction - any other issues that may arise. 

If these conditions are met, the regulator expects the return to lending to have taken place no later than nine months after the new business scheme comes into effect. It does, however, stress this decision is based on the information the FCA is aware of at present.

In response to the announcement, Amigo’s chief executive Gary Jennison said: “We thank the FCA for providing this level of clarity about its position on the proposed schemes of arrangement. 

“There still remain significant hurdles to overcome before Amigo can deal with its insolvent balance sheet but this information will help us move forward to the next stage in delivering the best outcome possible, given the circumstances, for our customers, creditors and other stakeholders.”