Amigo Shares Crashed 88.3% As It Winds Down Its Loan Business

The Amigo Holdings PLC (LON: AMGO) share price crashed 88.3% after announcing that it had switched to the fallback solution that requires the orderly wind-down of its business after failing to raise the £45 million equity capital mandated by the High Court sanctioned Scheme of Arrangement.

The move requires Amigo’s operating subsidiary Amigo Loans Ltd (ALL), to immediately cease all lending activities and start winding down its operations. The crash witnessed in Amigo’s share price was expected, given that the company’s ordinary shareholders would not be compensated under the Fallback solution.

Furthermore, the scheme creditors will receive a small amount as compensation since the lender cannot contribute the £15 million minimum scheme contribution mandated under the Preferred Solution if the capital raise is successful. 

Amigo revealed that its advisers and management team had spoken to approximately 200 potential investors as it tried to raise the £45 million mandated by the High court. Still, most were unwilling to participate in the capital raise for specific reasons. 

Potential investors' reasons include the affordability of Amigo’s loans to UK households under the new terms set by the FCA, which meant that the company had to reject most customer applications under its new RewardRate lending program. 

Other reasons included the increased regulatory scrutiny over providers of mid-cost credit in the UK and the potential regulatory interventions that could easily see the firm barred from continuing lending activities. 

Overall, it is a sad day for Amigo’s customers, employees and shareholders as the lender starts liquidating its assets. 

Danny Malone, Amigo’s CEO, 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.”

*This is not investment advice. 

Amigo share price. 

The Amigo share price plunged 88.27% to trade at 0.19p, from Wednesday’s closing price of 1.62p.