The latest Investing Matters Podcast with Jean Roche, Co-Manager of Schroder UK Mid Cap Investment Trust has just been released. Listen here.
Stevie - I think that is a good question to ask. I think anyone currently in a lending or loan cycle will be aware, but those who are no longer in market as their credit needs have subsided will probably be much less aware. The only people using the debt camel site and MSE will be on high alert, but everyone else is probably less tuned in.
Surely ambulance chasers would be better as they take a % cut and therefore will be willing to submit as many yes votes as possible?
Had to break the article up in two!
While the exact size of the haircut customers will suffer under Amigo’s plan remains unknown, there is no doubt they should brace for a big hit to their compensation (Ben Martin writes).
The Financial Conduct Authority’s concern, relayed by Amigo yesterday, is that customers “stand to receive significantly less than the value of their claims”.
This is painful news for borrowers seeking refunds from the subprime lender. But for Gary Jennison, the new chief executive of Amigo tasked with reviving its fortunes, the regulator’s decision not to try and block the scheme of arrangement, despite its reservations, takes the group a step closer to a rescue.
“We are pleased and it’s the right thing for them to do for customers,” he said. The scheme, he argues, is the fairest way to give all past and present customers the right to make a claim. “At the moment it’s people at the front of the queue, shouting the loudest through claims management companies, who are getting paid.”
John Cronin, a financial analyst at stockbroker Goodbody, said the watchdog’s decision not to formally object to the scheme was “a positive development” and that “it would be surprising if the authority did not, separately, have concerns to raise when complainants are not set to receive the full value of their claims”.
He said the regulator’s move was encouraging for the doorstep lender Provident Financial, which last week announced that it would pursue its own scheme of arrangement to tackle a rise in complaints. “It surely means it is now more likely that the FCA will not seek to object to that scheme either,” Cronin said.
Amigo stopped issuing new loans a year ago when Covid-19 hit but Jennison hopes to return to lending if the scheme goes through and to offer new products aside from guarantor loans.
The City regulator has raised concerns about a plan by Amigo to cut compensation payouts to hundreds of thousands of customers but has stopped short of blocking the subprime lender’s divisive proposal.
The guarantor loan group has been crippled in recent months by a flood of complaints from past and present borrowers who claim they have been mis-sold high interest loans that they could not afford and are seeking redress.
Amigo wants to draw a line under the crisis by capping the refunds it hands to these customers and has warned that it will fall into insolvency if it is prevented from carrying out its scheme.
In a boost to its survival plan, the lender said yesterday that the Financial Conduct Authority (FCA) had decided not to attempt to block the plan, despite not supporting Amigo’s proposal because it will result in big haircuts to compensation payments. Shares in the lender rose by 3p, or 24 per cent, to 16p.
The FCA’s decision comes before a court hearing next week to approve Amigo’s rescue plan, which is structured as a scheme of arrangement.
If the court backs it, Amigo will put its proposal to a vote by its creditors, who include 700,000 former customers, 300,000 current clients and the Financial Ombudsman Service (FOS).
Amigo’s fight for survival comes less than three years after its stock market flotation that valued it at £1.3 billion. It is now valued at only £74 million. The Bournemouth-based group is Britain’s biggest guarantor lender, offering finance at annual interest rates of 49.9 per cent to people with weak credit histories. Its loans are guaranteed by another person, such as a relative or friend of the borrower, who are liable if repayments are missed.
Its shares have plunged since the FCA raised concerns about guarantor lending, customer complaints surged, and it became embroiled in a dispute with its founder, entrepreneur James Benamor.
Under the scheme, former borrowers seeking compensation would receive cash but their refunds would be cut by an amount dependent on the number of claims received by Amigo. Current borrowers would have their loan balances adjusted and if that did not provide full redress they would also receive cash. Guarantors are set to receive only a small payment.
SPONSORED
Amigo said that the FCA had “identified certain concerns with the scheme” that will be relayed to the court. These included “the fact that customers with valid redress claims in the scheme stand to receive significantly less than the value of their claims and the methodology for claims assessment, in comparison to the typical approach of the FCA and FOS”.
However, the regulator “is not currently proposing to take any additional regulatory action that might stop the scheme were it to be agreed by the scheme creditors and sanctioned by the court,” Amigo said.
The FCA did not comment.
Behind the story
While the exact size of the haircut customers will suffer under Amigo’s plan remains unknown, th
+1 to what CreativeNE said. Don't apologise for sharing information like this that can help us PI's make up our own minds.
I also like your interpretation of the statement wording CreativeNE.
Good thought provoking stuff amigos!
Ignore my last post. I misread Robbo's post. They meant that by the second court date after the vote, not the first court date was over two days. Apologies!
Do we think / know that the court case is over two days or just one?
RNS generates interest (in today's case positive!).
Amigo appears in highest % increase shares on Investing.com 3 days running.
Amigo in top 20 most traded shares so far today on Investing.com.
The more people that see this the more that will pile in and drive up the share price.
“There is only one thing in the world worse than being talked about, and that is not being talked about.” Oscar Wilde
Provident timeline can be found here and is behind Amigo
https://scheme.providentpersonalcredit.com/default.html
Also interestingly LSE trades do not show anything after 16.29 yesterday nor a UT. Checked on some other stocks in my portfolio and they are showing UT. So why not AMGO, something to do with all those after hour trades showing on Morningstar? Something fishy going on. And before I get shot at it could be fishy good or fishy bad based on your personal view ha ha
Amigo is a small company ~300 employees I believe. Bringing in a new management team in a company that size the culture can be changed very quickly. I have no issues that this is an issue. If it was a company of thousands of employees set in their ways then maybe a problem. But I dont believe that is the case so another tick for me :)
Just to change the subjet lol
1.2m trades at 12.0p showing at 16:30 on Morningstar. WTF is going on?!?!?
Yep I'd agree Jonno. Perhaps something to do with ensuring liquidity in the stock market, making sure brokers have enough access etc. As I say I don't know enough about these things and just posting to try and make sense of what is going on.
To be fair it doesn't specify if it is buy or sell. Which could explain the declining sp lol. You can see for yourself, it is free to see, just put in AMGO and click share trades and there they are
I'm continuing to see chunky trades on Morningstar (one for 250k went through at 13:56 but not showing on LSE). Perhaps the company are taking these for the LTIP? I don't know enough about these things, but the shares have to come from somewhere right?
Correct Grim. They have enjoyed or benefited from the original loan capital (paid something off or purchased sonething). The compensation is for the cost charged by amigo I.e the interest paid, which is also paid back to succesful complainants with an additional 8% statutory interest on top
Jonno - I agree that there is not enough detail there for the FCA to support at this stage. It is completely guesstimates at this stage as you rightly point out.
What I am seeing on forums like Debt Camel and MSE is that the pot currently isn't big enough, so think it is going to be a balancing act to get the pot big enough to tip the balance enough for the FCA to support.
I am sure the spreadsheets will be in overdrive at Amigo Towers these next few weeks!
A1B2, for some reason when I post links it strips them out.
You can see this on Morningstar, go to Amigos profile and click the trades tab. You will see a few 100k and 400k trades that don't show up on other basic sites like this.
I really hope that someone is still heavily accumulating. I gobbled up a few more today on the drop.
GLA