AMIGO Loans has said there is a “real possibility” it will enter an insolvency process – but that it is trying to come up with a new offer to mis-selling complainants.
The move came as the Bournemouth-based guarantor lender revealed that its bank had given it a three-month lifeline.
Amigo – which employs around 400 people – said the bank had extended the grace period it had given Amigo to September 24.
The waiver had been due to run out yesterday.
During the extension, the bank will not take action if Amigo breaks the conditions attached to the securitisation facility.
Amigo lost a crucial High Court case last month in which it sought approval for a scheme to limit compensation payouts to people who had made complaints of misselling
It had warned it would “inevitably” go into administration if its proposals were not approved.
Amigo’s founder James Benamor – who fought an unsuccessful boardroom battle to regain control of the company – yesterday shared an email which had been sent to Amigo customers.
It said: “Amigo continues to face a situation here there is a real possibility of us entering into an insolvency process. Following the High Court’s decision not to approve our proposed scheme, and our decision not to pursue an appeal, we are discussing with our regulator, the Financial Conduct Authority, what we do next. The judge suggested that we should try to amend the scheme and this is one option that we are considering.
“Given this, we are actively considering what a different scheme of arrangement could look like and thought it might be helpful to provide some further information in relation to why Amigo proposed a scheme.”
The email went on to say: “Amigo does not have enough money to pay compensation for all the valid claims and would therefore go into an insolvency process. If Amigo was to go into insolvency, there would be no cash left for customer compensation. This is because there are other creditors (such as our bondholders, employees and IT providers) that would need to be paid before customers with a valid claim.”
Mr Benamor said on Twitter that the email “seems to imply they are coming back with a revised scheme of arrangement shortly”.
He added: “That is MY reading of it, obviously. The email is clear that they may also enter insolvency. This does not however seem like the kind of email you send if you’re not about to come up with a revised scheme.”
Amigo has said on its website that it wrote to more than 140,000 customers recently, including those who voted on its scheme of arrangement and a sample of those who did not. This was in line with a request from the High Court judge, to help improve processes and communications.
Amigo told investors yesterday that it was still talks with the watchdog, but that insolvency was still an option.
It said: “Following the recent High Court judgment relating to Amigo’s proposed scheme of arrangement, the board of Amigo has reviewed options with the Financial Conduct Authority and discussions are ongoing.
“This could result in a revised scheme of arrangement or insolvency.”
The waiver on Amigo’s facility has been extended several times. An initial extension from July to December last year was meant to give it and its lender time to figure out what impact Covid would have on the business.
It later extended this to June 25 this year, before deciding it needed yet another extension.
Amigo said: “All cash generation arising from customer loans held within the facility is restricted and will continue to be used during the extended waiver period extension to further reduce the outstanding balance of the facility. As of the date of this extension, the facility was drawn at £27million.”