Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
The last we know was the securitisation drawings were circa £110M. Not all collections are on the securitisation pool and in fact this is the smaller of the two secured pools and I doubt very much whether it is near zero as you allege. The probability that all collections are from one pool is probably zero so the covenant matters. The pot for the secured sterling bond is already £165m at last accounts so what are you talking about saying they are starting? I have a very strong sense that you understand very little about Amigo
Yes, they don't like the sector and what they really want but wont say publicly, is they are determined to kill it once and for all. Thats why I think they have to make the unlimited commitment and that makes it hard for the FCA and shows up their real agenda if this not approved. I would add that Amigo should pay interest on any valid claims not settled after year 4 then even the time value of money argument goes away. The Court only has to be satisfied that it is reasonable and there is no coercion. Cant get more reasonable than agreeing to pay all valid claims and late payment interest if it takes them a while. The argument on supporting 15% is that the commitment is on the accounting pre tax profit not the available cash at the pre-tax level which will be much lower due to the secured lenders secured position. What I mean by that is Amigo may well report an accounting profit on the securitised pool of assets but the cash wont be available as it is diverted to those lenders. Amigo didn't even attempt to explain this, same applies re the Secured Bond
The Board should be feeling very embarrassed by the recent court ruling so their confidence will be low so they could make another stupid decision for sure. They cant realistically increase the upfront cash given their cash flow submission to the Court but they can increase the length of time for the 15% of future profit contribution. given the first fiasco I think they have to make commitment till all judged claims are met. To not even try this would show them up as ........(I don't really want to say what this says to me) rather than foolish, out of their depth and naive. However they may just want this embarrassment to end and so if you are communicating with Amigo the SIMPLE message I would give them, pay the 15% of future pre-tax profits until the valid claims are met but ask that if the case is being led by a CMC they should be obligated to pay some of the application cost without charging back to their clients so as to deter the time wasters.
The deal is Amigo presented to the High Court a cashflow schedule showing that they are just able to repay the £234m Bond in Jan 2024 by putting £15m in the claimants pot upfront. If they put £30m or £60m in they cant do it and they would be sued by the Secured Bondholders if not stopped. This is the real problem faced by the Board, by their OWN projections they dont have the spare cash
yes to June 25th. Operationally there is no difference to them as the waiver was BOUGHT by Amigo agreeing they get all cashflows. Why would they not extend? If there is any overlap between the securitisation lenders and bond holding would be one good reason, reputational damage by association with the Amigo circus, loss of confidence in Amigo mgmt as if they legally put it in lockdown their people take control of executing the run down. Those are some possible reasons but the point is not whether they will or will not, it is the uncertainty created. Amigo cant build when those lending £100m are rolling approvals for 3 months at a time. Court didn't even discuss this and thats why I think this is the blind leading the blind.
ultimately blame is Amigo board not the hired help although you would expect a lawyer to be strong on the technical legal position on the financing. Nobody knows what the securitsation lenders will do with their waiver or we would have an RNS. This in itself casts doubt and the fact that they are exiting the financing by only agreeing to waiver if they get all cashflows on their security pool. You only have to follow the money to know what is really going on. the fact the court, Dicker or FCA didn't understand this and discuss it in detail is a shambles but opens them all up to suits of gross negligence and incompetence if this goes under plus the Amigo Board
The Bond is precisely £234m its on the bal sheet so no debate or guesses needed. It has an annual coupon of 7.625% if I remember right with annual pay. If that coupon goes to the holders who have the rights to the £165m cash this isnt an issue at all as only an idiot would stop their cash being paid to themselves. The issue is can these guys find a way to accelerate or stop the cash moving with a fixed charge. The securitisation facility is already effectively in run down by agreement rather than legally. The £234m bondholders will hate fact the other main secured lender is exiting and they will HATE what the FCA brief said about using their cash. That's why this decision has been such a disaster as its based on ignorance. The only upside is shareholders and the claimants will have a strong legal case against the FCA as their brief was very irresponsible in persuading the court there is no problem with cash or time. As far as I am concerned since that day FCA are underwriting all losses as it is a matter of public record what they said in the HC which was factually wrong
You don't know what you are talking about that's not the way securitisation works. If the waiver not extended the facility just goes in run down with all cash going to senior holders. There is no such thing as Amigo having to pay £100m it just doesn't work like that nor does any securitisation. This is exactly the current position as the waiver was obtained by getting all the cashflows during the waiver period. The significance of not extending the waiver is legal not operational in the sense of the linkages to the £235m sterling bond and whether these guys can accelerate or tighten their floating charge on £165m of cash. If that happens things get very serious and thats why the FCA counsel clearly did not understand exactly how Amigo is financed and why their may be urgency. It all depends on what those bondholders are allowed to do if the waiver not extended. There is absolutely no possibility of Amigo been asked for £100 odd million, securitisations just dont work like that
Thats true but remember the securitisation lenders only granted the waiver on basis that all cash on their pool reduces their senior notes and nothing goes to sub holder which is Amigo. No such option exists on the £234M secured bond as there is no partial repayment option and hence the cash build up. They will be getting organised to try and improve the floating charge on the cash and if they do that Amigo is existing only to repay them. That is why Insolvency was and is a valid option that needed to be presented to creditors. Where mgmt went wrong is they tried to push it too far with the 15% for 4 and employed a very weak individual to make their case in Court.
Make 15% infinite is the only simple way and is in line with what they proposed so Board can save some face. If FCA disagree with that then it is clear they want this sector killed and out of business. The biggest problem is that while GJ might be a nice guy and folksy he is way out of his depth. They presented two options and the only tangible back up they gave was a very basic cashflow schedule that a first year business student could prepare. Dicker was woefully inadequate as well and only thing he said was that it wasn't for the court to design the best option and he was shot down on that in a matter of seconds. If the Board believed Amigo can survive by giving away 15% for 4 years then they can until all claims are settled. They stroke they tried to pull was idiotic and they now look like fools. The secured holders will have taken notice for sure and if I was them and got an opportunity I would put it in administration with my own accountants running things.
The FCA doesnt even allow Amigo to pay a dividend they have zero chance of getting approval for share buybacks. All this stuff about buying shares is total rubbish. FCA wont allow it and Secured lenders wont either until they are repaid in full
A lawyer going to negotiate the number of shares for an aggregate claim size that has not been established and will take years. Totally idiotic and impractical. I would not agree to such a shambolic idea. Its the type of thing designed by a lawyer not a business person. A sledge hammer to crack a nut. In my world layers document commercial terms agreed by business people and wrap it up so it is legally enforcable. Day you put a lawyer negotiating you get the shambles we all recently witnessed. Impractical, over the top and plain stupid.
You have no idea what you are talkng about. Shares issued that don't trade to claims that have not been established. Rubbish, rubbish, rubbish. What you fail to understand is that giving up a share of profits when claims are established has an economic consequence for the claimants that is similar to a debt for equity swap IF the debt claim was established. It is better for shareholders as claim is there until the obligation is met. The Amigo Board has shown itself to be of limited capabilities. Simplicity is the key to a solution. Di..king about with people like you proposing half baked ideas that have legal difficulties when there is a very simple solution is daft. You should propose yourself for the Amigo Board, you would be in good company.
They absolutely did not say that in Court. The FCA suggested an unsecured established claim is swapped for equity. He called it a debt/equity swap. The problem being the valid claims have not been established yet so hence the trust. In this example there is consideration i.e the unsecured ESTABLISHED claim for shares. Amigo issuing new shares for zero is totally stupid idea as there is no consideration and current shares will fall to 0.5p or near zero. The % of profits is much simpler and works much better. You clearly do not understand what the FCA counsel proposed.