Amigo Loans to “wind down” its business operations

To execute this, the payday loan company – which would have seen the business return to the market with two new loan products – needed to raise £45m to cover the equity capital required for this, however as of the start of this month the firm hadn’t received enough interest to reach this figure. 

Following this, the board explored whether a potential new scheme which would have required a reduced amount of capital investment would succeed – concluding achieving this would be highly unlikely, and has resulted in the business pursuing this “fallback solution”.  

As part of this process, Amigo will stop lending with immediate effect and will be placed into an orderly wind-down – with the result that all surplus assets after this wind-down will be transferred to the scheme creditors.  

The wind-down of the business will last approximately 12 months, during which time the existing loan book will continue to be collected.  

The scheme claims process, meanwhile, will remain unaffected – although there will be an impact to the total compensation scheme creditors will receive in terms of pence in the pond as they will not receive a share of the minimum £15m scheme contribution that was to be raised from investors.  

Amigo Loans’ chief executive Danny Malone said: “This is a very sad day for all our employees who have worked extremely hard to address historic lending issues and rebuild a new Amigo, and for our shareholders and wider stakeholders who have supported us. It’s also a sad day for creditors due redress who will now receive a lower level of cash compensation than they would had the new business conditions been satisfied.  

“I would like to thank colleagues, in particular, for the considerable commitment they have shown over a long period of time. We are very sorry to be delivering this news today. 

“The current board came into Amigo to save the company because we believe passionately that there is a need in the market for a regulated mid-cost lender that meets the demand of financially excluded people who deserve access to regulated credit. We have fought hard to deliver the best outcome for creditors, colleagues and shareholders and have left no stone unturned. 

“From the beginning, we have faced significant challenges in seeking a solution in the best interests of all our stakeholders and have had to make a series of difficult decisions. A successful scheme which provided a fair financial offer to scheme creditors was always the only way shareholders could retain any value for their shares.   

“Clearly the economic and market environment has moved against us considerably since our Scheme, formulated in late 2021 / early 2022, was sanctioned last May. This has severely impacted both our ability to raise capital and the affordability of loans for our potential customers, coupled with tighter lending controls.  

“Whilst removing the £15m upfront payment to the Scheme would take away one barrier and reduce the capital required, there are multiple considerations and risks, as highlighted in today’s announcement, which have led us to conclude that successfully executing a completely new scheme followed by a lower capital raise would remain highly unlikely.  

“We appreciate this is extremely difficult news for our employees and our shareholders but, after full and careful consideration of all further options available to us, we do not believe there is another viable route forward.”