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“He’s not an old man and would still have to mix in circles. A name is everything to some.”
His name is already pretty tarnished. Either he turned up to court without a shred of evidence to support his assertions about imminent insolvency and put Amigo’s survival at risk as a result.
Or imminent insolvency isn’t a risk at all, and he misrepresented the position to the regulator, creditors, and the court.
I agree they can do it. It would just demonstrate that the choice they put before creditors first time around was utterly false. I would find it hard to be relaxed about that.
Vinson - They might be saying that now. But they were previously saying if the original scheme was not passed, Amigo the only other possibility was insolvency. Paragraph 129:
“the Company did not seek to argue that the choice presented in the Explanatory Statement was anything other than binary. The Company’s position was that it was entitled to convey this message: the directors had decided (and consistently stated in public communications) that if the Scheme failed Amigo would go into a formal insolvency process”
Lloydy boy “Shareholders have been punished enough and I would like to think that the fca will be pragmatic”
I can only assume you haven’t read the judgement or the FCA response. Quite clear FCA wants to see shareholders take at least the same degree of pain as creditors given their respective ranking in insolvency.
Specialonek - an absolute non starter for countless reasons, including competition (why isn’t every regulated firm entitled to a £100m loan from the regulator? Why wasn’t Wonga, Brighthouse, Quick Quid, Sunny - all RIP?) and reputation (firm commits mass scale irresponsible lending to financially excluded client base, regulator bungs them £100m)
Agree a new scheme can be proposed. But which one?
High risk version would be a scheme on similar terms, which acknowledged that insolvency is not inevitable if creditors vote no. Board take a risk on creditors voting for it anyway. Can’t see how board can make that argument after all they’ve said. Can’t see FOS voting in favour of those terms. FCA would have to object again but judge might pass it if creditors get correct info and still vote in favour.
Or propose a safer version which addresses FCA concerns - which would mean shareholders take a decent haircut but FCA could step back because their concerns have been addressed.
FCA website says “We believe that a fair compromise can still be proposed to customers. Under the proposed scheme, redress creditors would have had their claims significantly reduced and rights restricted, whilst shareholders and bondholders were not contributing what the FCA considers to be their fair share to enable the firm to remain solvent”.
Cabert - “Looks like there was a plan B all along, show's due care from the company”
Or for those of us on planet Earth, existence all along of Plan B would (if true) show massive bad faith and dishonesty from Amigo board when they said it was THIS scheme or nothing.
Soundsrisky, I don’t know if that’s aimed at me, but I’ve been saying the same thing for months and my posts stand up to scrutiny pretty well I’d say.
What I wrote about dilution may be unpalatable for shareholders but I’m not mindlessly kicking the share. I’ve always said a scheme that doesn’t share pain fairly between shareholders and creditors isn’t fair and FCA would have to object. Now it’s clear the court agrees.
Shareholders were all for creditors being asked to vote on a “take the scraps or get nothing” basis. After the judgment and the basis of the FCA’s objection, I don’t see how shareholders can avoid a significant haircut if another scheme is to be given the go ahead.
Tend to agree with Senator. Can’t see why secured lenders would agree to take any further risk.
Judge was focused on legal rankings of stakeholders in insolvency. Shareholders rank below creditors in insolvency so that’s the major imbalance that needs to be addressed. You can’t have shareholders fully protected and creditors on 95% loss. That needs to be evened up - tinkering (eg extra £5m up front) won’t do.
So I think there needs to be noticeable shareholder dilution, with balance of equity held in trust until creditors have got 50, 60, 70% of their money back via dividends and value of equity.
I find it strange that any loss of face for Amigo’s potential insolvency should sit anywhere other than with its past and current management.
Ultimately, the sanctioning (or not) of the scheme is for creditors and the court, not the FCA. And the FCA has survived the collapse of a large number of high cost lenders already where customers ended up with nothing.
In any case, I don’t know whether you’ve seen the press reaction? With possible exception of ThisIsMoney, FCA comes off pretty well - a nice contrast to LCF and Greensill coverage. I think it would cope with another sub prime lender going down the pan under the weight of its own poor practices.
Negotiations with who? Bondholders maybe?
As far as I can see, the FCA will not be debating a new scheme design with Amigo. Regulator set out it’s concerns and it’s up to Amigo to come up with new proposals that address it.
Paragraph 111
“The FCA does not (as a matter of policy) negotiate the terms of schemes of arrangement with regulated firms and it has not sought to do so in the present case”
As I’ve said, I don’t think tinkering will do here. In my view, a new scheme can’t have such an imbalance between shareholders and creditors. So I think new scheme needs to:
- commit to a minimum % return for creditors, say 66%?
- a significant shareholder haircut, say 50% with balance of equity held on trust for creditors until they are repaid.
- ideally more money up front
Shareholders and creditors to vote on and approve new scheme on a “take it or bust” basis.
Senator, this is more than embarrassing for Gary and BOD. Either, they either walked into court saying things that are just plain wrong, which can only be down to incompetence or dishonesty.
Or they were right but walked into court without any evidence to back up their position. And if they were right to say it’s this scheme or bust, that failure to evidence their position means the firm will now enter insolvency.
Anything other than insolvency means Gary Jennison was spectacularly wrong in what he and Amigo told the court and creditors:
Paragraph 19
“Mr Jennison says in his first statement that the board confirmed its earlier views that, if the Scheme is not sanctioned, there is no viable option other than administration”
Paragraph 129
“the Company did not seek to argue that the choice presented in the Explanatory Statement was anything other than binary. The Company’s position was that it was entitled to convey this message: the directors had decided (and consistently stated in public communications) that if the Scheme failed Amigo would go into a formal insolvency process.”
Paragraphs 96/97
“Counsel for the FCA submitted that the court has to distinguish between two questions: what would happen if there was no scheme or restructuring at all? and what would happen if THIS Scheme was not approved and sanctioned? He argued that the Company’s evidence tends to conflate the two questions and treats this Scheme as the only possible scheme for returning Amigo to financial health.
I agree with this submission. The evidence adduced by the Company has failed to persuade me that the most likely alternative to THIS Scheme is the imminent collapse of Amigo into insolvency”
Funny that three director LTIPs were announced to market in February and March. Shame they weren’t working on a robust scheme instead of feathering their own nests.
Thanks Senator, really useful. My only comment is that if FCA (and judge) didn’t understand Amigo’s true position, then that’s because Amigo didn’t set it out, either in the papers or in person. Their QC basically said, “it’s this scheme or bust because that’s what the board have decided it is”.
So if the board now do something different, their position is clearly untenable. Surely FCA will have something to say about whether they’re fit to lead Amigo into next phase after this?
The FCA said that what was presented to creditors and the court was flawed. Paragraph 127:
“The FCA submits that the Explanatory Statement failed fully and fairly to inform the constituency of Redress Creditors about the Scheme and the realistic alternatives open to them“
That could be due to an honest mistake (which would mean incompetence by GJ, the board, and the exec team he has built and boasted about, on a scale which jeopardises the business).
Or it could be dishonesty.
The only other alternative is that they were right and FCA / court is wrong. But in that case, two things follow. 1 - Amigo’s team did a terrible job of making their case. 2 - insolvency is already inevitable now that the scheme has been rejected.
Pupper, you are very forgiving. The senior team can’t hide behind advisers. They appointed the advisers and should’ve scrutinised - and understood - everything they came up with (at considerable expense) BEFORE they walked into court. That’s why they are paid huge salaries and have crazy LTIPs. The buck must stop with the bosses. Did you see the press coverage?
Franky, it takes a fair amount of delusion / wishful thinking to say we should think of the scheme as an opening salvo. The judge was absolutely clear that this was put to creditors as Amigo’s best possible and final offer - take it or we’re bust. Let’s be clear, for a judge to overturn a 95% creditor vote, there has to have been a major issue with the board’s actions and decisions somewhere along the line. If you think the board told the creditors, the FCA, AND the court that insolvency was inevitable as an “opening salvo”, you’re calling them liars.
IKN - happy to clarify.
In my view, Gary, BOD and the exec team are 100% at fault for designing a terrible and grossly unfair scheme that the FCA ultimately felt bound to oppose (see my posts from January / February).
If they were right that it’s their scheme or inevitable insolvency, it’s my view that they’re 100% at fault for being unable to evidence that to the court and FCA. And Amigo will now go bust. Or...
If they were wrong that it’s their scheme or bust, it’s my view that they’re 100% at fault for misrepresenting the position to FCA, creditors and the court. Whether that was rank incompetence or deliberate dishonesty, I don’t know.
The fact is the judge says Amigo gave creditors a “false impression” that it was this scheme or bust. It’s 100% their fault that the judge felt compelled to reach that conclusion and consequently to reject the scheme.
Most of the board and exec team have only been in post for a few months so, in my view, they’re clearly not at fault for the wide scale irresponsible lending that Amigo admits has happened.
A reminder. A High Court judge in the Business and Property Courts of England and Wales AND Amigo’s prudential regulator both said that Gary and team had not demonstrated that insolvency was inevitable. (By the way, Amigo doesn’t yet appear to be insolvent).
If there’s any doubt about the reality of Amigo’s situation, don’t you think the guys running the company might be at fault?
And don’t you think you should’ve considered that uncertainty before making your investment decision?