The latest Investing Matters Podcast with Jean Roche, Co-Manager of Schroder UK Mid Cap Investment Trust has just been released. Listen here.
Yes, but they're not doing that. They are raising 45m via equity, then will raise additional debt to fully fund lending
No. the 45 is all equity. Funding requirements beyond that will be from debt, ie gearing.
"The fca have to sanction new lending or there will be no compo payments" ... this isn't correct. Forecast was for 29p in the £ vs 41p fwith New Business Scheme
"Change of control" is a red herring. It just means that the underwriters will/could technically have a controlling stake during the capital raise process, rather than they actually want to keep the shares and control.#
On the other hand, I think I was wrong about the pot being fixed. If you have an existing loan, and make a complaint, then your compensation get set-off** in full** against the loan balance, rather than you only receiving a % of the claim via the scheme, hence the extra complaints provision today.
People borrowing to pay for everyday things that they can't afford maybe not be a winning model from a regulatory perspective.
As below: Their liabilities are now capped, so actual claims volumes and potential liability are irrelevant.
350/20%
The overall payout value is pretty much already agreed as part of the scheme of arrangement (~£116m). This is substantially less (~40%) than the estimated value of claims (~£350m). Which in turn assumes that only 20% of eligible customers claim (implying a total potential liability of £1.75bn!)
However, as the payout is fixed as part of the SOA, the actual number and amount of claims received only impacts what percentage of the claims is paid.
Maybe, but "being entrepreneurial" is not the job of NEDs, who make up 4/6 of the board. Their job is to safeguard shareholders funds, keep an eye on the executive management, and make sure that the business is legally and regulatory compliant.
The Executive Committee, including the two executive directors, are who manage the business day-to-day.
As should be the case with non-execs in a quoted company - they are there for governance, not to execute.
NEDs pay (for larger companies) is also deliberately detached from company performance, to ensure that they they focus on the governance, rather than, for example, focusing on growth at the expense of increased risk.
What turnaround is that? They haven't actually done anything yet. And shifting your Chief Risk Officer across to Chief Operations Officer would be a little unusual (different skill set, and PD doesn't seem to have any ops background), particularly as they already have a Director of Operations who has only been in the post 5 months.
They haven't been sacked. They've just shuffled committee assignments around. People on this board need to learn the differences between Non-Executive Directors (who are responsible for governance), and Executive Directors, who do stuff.
"working capital" is pretty much an irrelevant metric for a loan business.
That's how capitalism works. Equity holders take on the risk, in return for the potential of higher rewards.
Corporation tax is payable on profits, not funding. There would be no immediate tax implications of raising the money. On the other hand, hopefully the money will be used to generate greater future profits on which CT would be payable, although the interest payments reduce tax payable on those profits.
The net asset position last year isn't really relevant, the business literallly just reduced it's complaints liability via the SOA by ~£150m to end up in with 84m NAV. Given that any increased debt would be used for lending, it could be secured against the loan book/new loans anyway. That said, given that Amigo is evolving it's target market and product offer, and lending at lower gross margins, external lenders would probably want to see some track record of performance, a decent level of underlying equity financing before lending them too much money to gear up with
Of course you could raise 180m off a 30m market cap. It's got a pretty clear investment case for new investors... take 15m off for the redress, gives you 165m for lending, with a broadly predicatable ROI. Add some leverage in due course to increase ROE. Current market cap is pretty irrelevant as almost all the company value goes to the new investors.
Yuri.. .they are already technically insolvent due to the 350m complaints provision. The prospect of the SOA is the only thing that stops them from being in admin now.
Why would they do a full redress if they've entered into an SOA to only pay a portion? Why would new investors fund previous redress claims if they don't need to? Makes no sense.
"As Morsesclub use credit reference agencies to confirm customer income, and national statistics to confirm outgoings. So all loans issued to a customer are affordable and completed to FCA rules. "
FWIW Sentence 1 does not imply sentence 2. Pretty much all companies brought down by complaints have done that. However FOS has ruled that that for many customers these checks are inadequte, and providers needed to be checking bank statements as well.
Which is how it's meant to work.