(Alliance News) - Amigo Holdings PLC saw its share price plummet on Monday after the Independent Customer Committee confirmed its preference for the 'new business' scheme of arrangement, but warned of insolvency if all schemes are shot down.
The scheme concerns the settlement of claims following probes from UK regulators into mis-sold loans and the way that Amigo dealt with customer complaints.
In September, Amigo submitted a revised scheme proposal, incorporating feedback from the Independent Customers' Committee, along with its future business plan to the Financial Conduct Authority and the ICC. Amigo first pursued the use of a scheme of arrangement, in order to attain certainty on the total liabilities which arise from customer complaints, in December last year.
Shares in Amigo were down 17% at 6.38 pence on Monday in London.
The new business scheme, which was first proposed to the ICC on November 12 this year, is dependent on the restart of lending operations by the Bournemouth-based guarantor loans provider as well as the securing of money through an equity raise.
Amigo has said it would contribute GBP97 million in cash from internally generated resources, alongside GBP15 million from an equity raise, under the new business scheme. The initial cash contribution compares to an amount of up to GBP35 million in the previous scheme proposal.
The ICC said it believes the scheme will provide creditors with greater returns than Amigo's second option, the 'wind-down' scheme, which would involve a managed wind-down of the Amigo Loans Ltd business under a scheme framework.
Amigo said it will now send a practice statement letter explaining the scheme options and the ICC's preference to the UK Financial Conduct Authority.
Following this, Amigo intends to ask creditors to vote on both options, and if both options are approved by creditors, Amigo will then submit both options to the court for sanction, with the new business scheme as its first preference.
If neither scheme is approved by the creditors or neither is sanctioned by the court, Amigo will enter into an insolvency process.
Amigo added that it is currently subject to an FCA enforcement investigation. The outcome of the FCA investigation could result in a fine being imposed on Amigo.
Chief Executive Gary Jennison said: "We are pleased that the independent customer committee has confirmed its preference for our new business scheme and that we can now take the next step to achieve a way forward for Amigo's creditors and other stakeholders. We have listened carefully to its views over a number of months, alongside addressing the concerns raised by the High Court and the regulator last May, and I would like to thank its members for the considerable time and commitment they have shown in helping us seek a fair outcome for all creditors."
By Heather Rydings; heatherrydings@alliancenews.com
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Amigo (AMGO)