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Buzz - Amigo turns up at court in May 2021 saying they’ll go bust imminently if the scheme isn’t approved. Judge calls out the bullsh*t and rejects the scheme despite 95% vote in favour. Amigo are still here 10 months later and you’re complaining about Debt Camel giving false information to influence the vote?! Hahaha!!!
Stevie, legally that’s true in normal circumstances but both Provident and Wonga ended up writing off the tail end of their loan books because there was no buyer. The market lacked confidence that the debts wouldn’t be challenged.
Amigo is on record as saying 65% of claims are likely to be upheld so there has to be a question as to whether a buyer would be found for these debts, especially as none of the claims have been settled since December 2020.
I still expect the go ahead from the judge today and I still expect creditors to vote yes and I still expect FCA not to object in May.
Only doubt is the rights issue - whether shareholders accept the dilution and the cash can be raised. Several people on here have said they’d vote against on principle. What’s the mood today?
Malpenn, why does when the rights issue take place alter the fundamental choice facing holders? Unless you’re suggesting this is a short term trade and not a long term hold.
Also remember Amigo can’t lend more than £35m until the rights issue is done so lending can only take place on a very limited basis until shareholders go through the rights issue. A £35m loan book (especially if Amigo will be charging customers less interest) is not sustainable for Amigo. Even lending at 49.9%, Amigo can only generate £17.5m in interest, which is less than half its current annualised operating costs.
As far as anyone has shown, the share price also doesn’t alter the cash amount holders will need to put in. If Amigo needs to raise £70m from its 9 billion new shares (see December RNS), shareholders need to pay 15p for every ‘old’ share they own. If Amigo needs to raise £300m from its 9 billion new shares, shareholders need to pay 50p for every old share they currently own. If Amigo wants to raise £15m from the new shares, it’ll cost 3p for every old share.
Those numbers are not affected by changes in share price and that reality will bite at some point. And the sooner that happens, the sooner Amigo can return to lending on a normalised basis.
Malpenn: “If you compare the share price of when we were in this position last time then there is value in the current price”
The problem with your analysis is that shareholders haven’t been in this position before because the first scheme didn’t involve a rights issue where shareholders put their hands in their pockets for an amount not yet known or take a 95% dilution.
As I’ve said I don’t think there’ll be a problem with FCA or judge this time (or with creditors). The question is whether the rights issue will be approved by shareholders.
I feel the sarcasm Viking!
I don’t think this is a surprise. The scheme is a major improvement for creditors (on paper) and inflicts pain on shareholders, which is what FCA wanted. I don’t think FCA will oppose at the sanctioning hearing this time and I expect the creditors and the court to approve the scheme. But I’ve said that before.
The big issue is that BoD have pinned the future on shareholder dilution / rights issue. If that doesn’t pass, Amigo is in wind down. So will shareholders vote for the dilution / rights issue and does today change any minds? Any thoughts?
Algoman, no definitive details on rights issue as far as I know. The 6 December RNS is here:
https://www.lse.co.uk/rns/AMGO/scheme-of-arrangement-update-tl0tm91rfp4ybdg.html
It says “It is hoped to raise a minimum of £70m in new equity”.
There are 475m shares at the moment. Amigo will create at least 19 new shares for each of those - so 9 billion new shares.
If they want to raise £70m, each share will cost 0.777p. If shareholders take up their rights in full, they’ll have to buy 19 of those for each current share, so roughly 15p per current share or £150 per 1,000 existing shares.
If they decide to raise the minimum (£15m for the scheme), then it’s £32 per 1,000 existing shares.
These numbers don’t change with fluctuations in share price.
Beastly, no backtracking. I’ve said this all along:
21 December:
As it happens, I think the scheme will pass easily. I also think there’s a better than 50% chance that Amigo will trade again (if FCA wanted Amigo dead, it would already have sunk).
10 Feb:
Franky, I agree that this should sail through the vote and the court. But Amigo are making the scheme and new business dependent on the rights issue. That’s the tricky bit. The last we heard in an RNS was that they wanted to raise “at least £70m” of new equity. That would mean shareholders (or someone they sell their rights to) putting in 15p for every existing share. Will that pass? If not, Amigo is in wind down.
I don’t think it’s quite as neat as that. If you put £100m into a firm that was going to use £50m to pay existing debts, it’s not clear to me that the firm would be worth £100m as a consequence of the cash injection. There may be some uplift but it’s very dynamic. I think IK was reasonable to strip out the unknowable effects of SP fluctuations from his calculation.
Yes, you have been roughly f***ed. Just the same as the creditors were to be roughly f***ed by Scheme 1.
And it has been entirely foreseeable for two years at least that getting roughly f***ed was a strong possibility.
Nothing wrong with IK’s maths. But his post ignores the fact that very few shares were bought at 30p.
And he ignores the fact that anyone who bought at 30p did so on the basis of inflicting a significant haircut on creditors. So any complaints about significant shareholder losses ring a little hollow.
Long long overdue, it should not have taken this long. In fact, it was granted in December 2020, the same month as the Scheme was announced. Disgraceful and self defeating.
Now they need to cancel the other LTIPs awarded to other execs after the scheme was announced.
I’m saying your comment contrasting ambulance chasing creditors with shareholders ‘losing hard earned savings’ is loaded and biased.
As I say, anybody investing in Amigo has had all kinds of red flags waved at them for the last two years - Benamor blogs, boardroom tussles, Benamor selling out, stopping lending, ever increasing complaints provisions, FCA investigations, VREQs, schemes of arrangements, court defeats, unflattering press coverage, exorbitant exec packages and on and on and on. But some people have simply refused to see what’s been staring us all in the face.
I don’t think shareholders deserve a 95% dilution and I do think a more sensible approach to Scheme 1, with a less drastic shareholder dilution at that point, would’ve been the best way forward.
Freekick - the vast majority of shareholders are after ‘free money’ too.
Shareholders haven’t ‘lost’ hard earned savings. They chose to use them to place a bet - and it’s been obvious that this share was nothing more than a speculative punt for at least two years (James Benamor published the first of his infamous blogs in March 2020).
Lots of shareholders piled in at sub 20p (by time the SP was 90%+ down on its peak - a clear sign of something badly wrong) and at the point when Benamor was selling out. Some of us were calling out the disaster at the time (and sold out).
But many continued to buy with a sense of entitlement that they’d get their free money by inflicting a 90% loss on creditors. I thought that was grossly unfair (and therefore unlikely to be approved).
For me, this all comes back to catastrophic errors of judgment by the board. Despite Gary supposedly recruiting a team that knew the FCA inside out (which has to be some kind of sick joke), the 90% haircut for creditors whilst protecting shareholders was a disastrous mistake that HAD to be opposed by FCA (as I also said at the time).
It tells me Gary and his team don’t care who suffers in their pursuit of a scheme - it’s pretty telling that as well as drawing £50k per month, Gary’s LTIP is still in place (as are the other exec’s).
Magpie, this is hard to follow. Are you now accepting that there will be a 95% dilution but you can swallow that because 5% of something is better than insolvency? I thought you’d previous said the 95% dilution wouldn’t happen?
LTHCine - but you weren’t outraged that creditors were being asked to take a 90% haircut in Scheme 1? Some pretty blatant double standards emerging here. Even though I think the 95% dilution is too strong, it’s useful in showing shareholders how unfair the proposals were in Scheme 1.
Wishful thinking Magpies!
Any plan that involves re-defining words that already have a settled meaning is not going to succeed. Amigo has had one Scheme rejected already - it can’t afford to play games.
In any case, tell us how you re-define this (from 21 February):
“The New Business Scheme will also require the Company to issue at least 19 new shares for every existing share in the Company”.
Robespierree - I agree that shareholders rank below creditors in an insolvency and that the judge thought the first scheme didn’t reflect that. But the scheme is there to avoid insolvency.
The judge didn’t say that shareholders should be wiped out (or take a 95% hit) as far as I recall.