(Alliance News) - Amigo Holdings PLC on Tuesday said the UK Financial Conduct Authority will oppose the scheme of arrangement to settle compensation claims from customers, putting the company at risk of insolvency.
Shares in Amigo sunk 20% to 23.75 pence in London on Tuesday morning. The stock was still up over 100% year-to-date, trading at 8.45p each at December 31, as the Bournemouth-based guarantor loans provider has worked to resolve the claims.
The scheme of arrangement was proposed by Amigo to settle claims following FCA probes into mis-sold loans and the way it dealt with customer complaints.
The scheme makes at least GBP15.0 million available to a million past and present customers. There is also the potential for a further GBP20.0 million and annual contributions worth 15% of Amigo's pretax profit in the next four financial years. 95% of the customers voted in favour of the scheme.
But the FCA has decided to appear at the court hearing on next week Wednesday to oppose the scheme, on the grounds that it is not fair in its current form, Amigo said.
In a letter to Amigo on Monday, the FCA said it is concerned that the value of customer claims was significantly reduced while shareholders are not being asked to contribute, and that Amigo did not negotiate with the claimants before proposing the scheme.
Amigo has repeatedly said it would go insolvent and that claimants would get nothing if the scheme failed.
By Ivan Edwards; ivanedwards@alliancenews.com
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Amigo (AMGO)