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Schalf - yet none of that counted at the last court hearing.
I agree that GJ is a determined man but the so-called Bournemouth posse have made some massive mistakes with scheme 1.0. It’s daft to believe they can defy gravity.
Even if the Amigo team find a way through at the second attempt, theres a big downside for shareholders because the FCA and court are clear that the distribution of pain needs to fall much more heavily on shareholders instead of creditors.
4tothefloor - the FCA says it is unhappy with the amount being provided by Provident but is not objecting because Provident does not want to carry on trading. In other words, Provident Personal Credit is being wiped; there will be no value in the business and no future profits being generated for the Group. Provident Personal Credit will collapse whether or not the scheme goes ahead - so creditors are deciding whether they want the £50m as part of that winding up process.
On the other hand, Amigo does want to carry on trading and generating profits for shareholders. So I’d expect FCA will want to see higher payout for Amigo customers than Provident has offered. Or, at least, for shareholders to take the same scale of haircut as creditors.
If people are prepared to see it, the letter to Provident is a clear indicator of where the FCA is at on schemes. My reading is that it’s not looking good for shareholders of firms that want a scheme.
Jonno, I’m not surely I fully understand your proposal but I’d like to. I have been arguing that shareholders should be diluted and the “new” equity be held in trust for creditors until they have received X% of their entitlements through dividends and equity value. Is your suggestion different?
FCA not opposing Provident on the basis that it accepts there’s an imminent insolvency risk AND no unfair benefit to stakeholders at expense of creditors (because the firm is winding up).
Time to accept the FCA doesn’t believe that a firm should be allowed to keep trading unless shareholders take a fair share of pain compared to creditors.
If the last scheme asked creditors to take a 90% haircut, what kind of haircut will shareholders have to take under a new scheme?
I’ve been very open that I sold up last October. I’ve also been clear I’m not Sarah.
If you go back over my comments I’ve always said a scheme that seeks to put all the pain on creditors and none on shareholders is self-defeating because the scheme is more likely to get FCA support if shareholders aren’t protected at creditors expense. I believe that what I’m saying is the best way for shareholders to get the scheme passed and avoid an insolvency wipeout.
Yes of course I saw that. But Amigo misled creditors about its position. Are you saying Gary should go back with a similar proposal but say “this time we really would go bust”?
What the precise numbers are is neither here nor there. The key point is they have to be balanced. You can’t have shareholders keeping 100% holding and creditors getting 10% (which was Scheme 1.0). All I’m saying is that shareholders should take at least the same pain as creditors. If that can be 10% haircut for each - great. None of us can know what that number needs to be because we don’t know the total liability.
Largey - see, for example, paragraphs 76, 77, 78 of the judgement.
Jonno, I’m not suggesting that the confiscated equity be sold immediately to raise cash today. I’m suggesting it be held in trust for creditors so that value from future profits / dividends / share price growth is fairly distributed. I accept an immediate sale wouldn’t be helpful but, this way, shareholders and creditors take a balanced share of the pain and have an equal interest in the future success of the company.
HH (yawn) - Amigo itself has only focused on the £15m in their 10p in the £ calculation. The balance adjustments are only available to a subset of creditors (who happen to have a live loan) and are not really part of the scheme because they’re funded by Amigo Loans Limited (rather than SchemeCo) and they simply reflect what would happen in insolvency.
It’s also no longer clear how balance adjustments might play in a new scheme - as things stand, with every month that goes by, people are paying down balances. We’re currently witnessing a transfer of value from creditors to shareholders (dangerous in my view).
What my hypothetical numbers do (50% shareholder dilution and 60% creditor payout) is rank shareholders and creditors in line with their standing in insolvency. The judgement showed clear concern that this hierarchy had been upended by the first scheme so these numbers simply reflect what the judge / FCA have said. In my view, whatever haircut creditors are expected to take, shareholders need to take at least the same percentage if it wants FCA buy in. That might be painful for holders but they’re in the same bind as the creditors - take it or get wiped out.
Amigos estimate is that the current £15m will represent 10p in the £ for creditors. I think that’s very optimistic but even if Amigo is right, an extra £45m on a 1-3 basis means creditors take a 60% haircut whereas shareholders only take a 25% haircut.
That still disadvantages creditors compared to shareholders and doesn’t reflect the hierarchy in administration.
Still not clear why a dilution (eg at 50%) with balance of equity managed on behalf of creditors by a trust isn’t the answer. Once creditors achieve a certain level of payback (say, 60%) through dividends or equity value, the shares are sold on open market (as government did / does with its bank stakes).
JB was the only senior person who thought it was sensible to challenge. It wasn’t just Hanish’s decision - he was in place for six months and he had an exec and board too. GJ and the new team also considered that option (after Hamish left) but also decided not to go ahead.
I think that tells a story. A successful JR would’ve been a lot cheaper than the costs of setting up a scheme, never mind the total cost of redress under the scheme. Why didn’t they go for it? Because they knew they’d lose because they know they treated customers poorly.
Amigo was JB’s baby - maybe he couldn’t / wouldn’t face up to that.
Mousekewitz, Provident’s scheme did not fail in court. They have had the first hearing and the judge has allowed the scheme to proceed to a vote, which is happening now.
I don’t know what has prompted Provident to stop doorstep lending but it isn’t the failure of its scheme.
Time to accept reality Magpies. Nobody, not even Amigo, disputes that these customers are owed money as a result of Amigo’s actions.
I don’t think shareholders having a pop at those who outrank them in insolvency is a good look. Raging against the reality of what’s happened is pointless.
There’s nothing more weirdly Corbynite than a bunch of shareholders thinking they should be protected from the consequences of Amigo’s own actions (whilst also clamouring for creditors with an undisputed entitlement to take their losses for them!)
Viking, I agree a 95% haircut for shareholders is very unlikely. But plenty of shareholders seemed to think that kind of a haircut for creditors was acceptable. Interesting to see the response when the boot is on the other foot!
I also think no dilution is unlikely either. I’ve previously suggested that creditors and shareholders should take roughly the same haircut.
Not if the trustees are required to realise the agreed payback for creditors (which should be less than 100%) as quickly as possible via both sale of equity on open market or dividends. Creditor equity would be returned to the market gradually, much like the government’s stake in the major banks was.
Senator, this is such a bizarre scenario as to make no sense. The trustees could gradually sell the stock on the open market as it increases in value to more quickly realise cash to pay to creditors. Nobody would seriously advocate the approach you suggest.
I don’t see how Amigo achieves 100% payback for creditors. Paragraph 40 shows it would take years and maybe decades to get to 100%. It would be a terrible drag on the firm for a long long time. The point of the scheme is to avoid paying creditors in full. The price FCA and judge want to see for that is that shareholders also take some pain.
Unless you think there’s been more jiggery pokery with what GJ and team told the court, I also think paragraph 40 shows future profitability may already be slower than thought.
When people talk about precedent, remember the FCA also wants to avoid setting a precedent where a firm can systemically mis-sell its products and then carry on trading having wriggled out of redress payments / FOS costs that every other firm has to pay. Prov has already copied Amigo, it would be naive to think there aren’t other watching this closely. This has to look difficult and risky and (yes) painful for more than just creditors.
I have always thought Jonno’s method was most realistic. Dilute shareholder stake by, say, 50% and put the 50% equity in trust. Ive never seen shareholder pain as being about rights issue and money in the pot now but about ensuring a greater share of future value (which FCA and judge said was demonstrated by recent increases in SP) was given to creditors as opposed to shareholders.
I don’t see bondholders agreeing to put any more cash at risk, personally.