The latest Investing Matters Podcast episode featuring financial educator and author Jared Dillian has been released. Listen here.
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The Preferred Scheme / New business scheme - https://www.amigoscheme.co.uk/docs/PracticeStatementLetter.pdf
This scheme not only provides upfront money that the committee wanted (£112m) it also satisfies the judges concerns during case one.
• We are balance sheet insolvent without the scheme and without sanction we will go for the wind down scheme or insolvency directly after not being sanctioned.
• The committee negotiated this offer over many months with Amigo, Amigo were described as transparent by the independent chairman. The offer not only shows they have done ALL they can for claimants and the BOD really want to offer a fair deal.
• Finally part of the new business scheme is stringent on raising £70m of new capital from investors within 12 months of the scheme being sanctioned. This dilutes shareholders the same way claimants are being diluted in their claim amount.
As mentioned earlier it is very unusual for scheme of arrangements not to be sanctioned by the court anyway but by taking the time and effort you can really see Amigo are focused on the right result for everybody.
This scheme is expected to return creditors 42p/£1 – This relates to 42% of what they would be entitled to claim.
Share Price Movement
Might be contentious but as we know shareholders and investors are mostly here to make money. The uncertainty as mentioned put a lot of people off but the facts are that on the run up to the last court case the share price reached 30.3p from a similar level we find ourselves today. There is too much uncertainty to predict accurately where the share price will go this time so I will not try but let me just say that there is great opportunity here as a well known company with an experienced board of directors, newly developed products, £300m of funding and a nation of sub-prime customers crying out for help at the end of a global pandemic.
There has been a recent seller in Bybrook that had over 12% of the company and have sold down to most recently announced Tuesday 18th January to under 3%. You might think this is a bad thing but I feel it is good on two accounts
• Bybrook are well known to invest in distressed bonds, their purpose was not to invest but to make money off the situation, when Amigo recently announced they were going to pay the majority of the bonds off that is when the selling started
• They seem to be willing to sell the amount anything down to 6p (which looks to be the bottom) also when they sell their last 2.6% that pressure then releases and we see a natural rise back to where we were before they started selling (Around 12p if I’m not mistaken)
Dates for the diary
• 1st Court Case – 16th Febuary
• 2nd Court Case – Late April
https://www.amigoplc.com/investors/investor-faqs
I know there are certain complexities with Amigo that would put a newbie investor or even a risk adverse investor off putting money into AMGO but I wanted to summarise on why I think Amigo is a great investment not just for the short term but for the much longer term.
Scheme Of Arrangement
As no doubt you’re aware if reading this Amigo is looking to settle all complaints dating back from 2005 with a scheme of arrangement.
The first scheme was proposed last year and was for a maximum of £35m with a portion of future profits. This scheme was voted in favour of by creditors by over 95% and the ombudsman. FCA initially stated they didn’t approve the scheme but would not be going to court to appose the scheme. This stance changed the week prior to the second court hearing where they did attend court and the rest is history. (One of the only schemes not to get sanctioned by a court)
The scheme not getting sanctioned was actually only down to a few factors that have imo been addressed in the new scheme;
• Amigo claimed it would be insolvent on the basis of the scheme not being sanctioned, the court saw no evidence to support amigo going insolvent in the short to mid term.
• Claimants were not properly consulted and given a take it or leave it option so the majority vote could not be seen as an overwhelming reason to sanction the scheme.
• Claimants were taking a large percentage loss on their valid claims where as shareholders would retain full equity stake in the business.
These 3 reasons were why the judge decided not to sanction the scheme. See full scheme judgement here - https://www.amigoscheme.co.uk/docs/archive/AllSchemeltdJudgement.pdf
All documents related to the previous scheme before/after ruling can be found here - https://www.amigoscheme.co.uk/legal-documents-archive
Right onto the new scheme –
It was announced shortly after Amigo would not appeal the ruling and instead work with the FCA with the judges comment to revise the scheme and come back to where we are today with Scheme 2.0.
Firstly economically we’re in a much better position as collections through Covid were better than expected. We also saw Provident successfully get their scheme of arrangement through the court, where again FCA didn’t agree with the scheme but didn’t change their stance and turn up to court. I have my own views on the Provident scheme and what has happened since but will leave that out of here for now.
The new scheme has been developed with a customer committee made up of 8 Amigo Customers (current and former, borrowers and guarantors) and an independent chairman. There was a really useful video that come out this week that explains how the negotiations took place and how 5 original proposals (plus any extra ideas from the committee) was whittled down with the options we have today.
MUST WATCH - https://www.youtube.com/watch?v=VQpJkN74gSw