Member Info for Senator1

The objective of SOA is to transfer value from shareholders to unsecured claimants but to cap it at a reasonably large number. Amigo were not only proposing doing that but had already set aside a very large amount to make this redress by balance adjustments. The judge wanted proof and it was sitting under all their noses but they didn't know how to read it from the fin. statements. That for me is the really sad bit, the proof was there in black and white, proof the judge kept asking for

My brother in law is a barrister and before he changed to law he did a finance degree. To argue this case sensibly you did need some detailed financial knowledge. Dicker was the wrong guy, he was comfortable on the legal point that it isn't for the court to design the optimal solution merely opine it is Fair. That was all he really said and when the FCA made some outrageous statements he said little. He did try to remind the court that despite the floating charge on cash the Board had to be mindful of their responsibilities to those creditors when the FCA were arguing there was loads of cash to finance other alternatives.
All he had to say was his client had designed a package excluding the 15% of future profits worth about a quarter of a billion pounds and they have already taken this from shareholders. That's done, waiting to be utilised and indeed we used £80m or so in this last 9 months. We don't know where the claims will settle but our best estimate is also about £250M. We recognise we cant fix everything with loan adjustments and so we have a cash component of £15m now to get going and then 15% of the next four years profits will add more cash and cover any shortfalls in our estimates. If we have done wrong we will make restitution and we have already provided for most of it in a very tangible way which you can see from a review of our financial statements. To the extent our estimates are wrong we have built in some cover for this scenario. The claimants recognised the value of our contribution we hope the court does too.
That was all they needed to do but instead we got a fixation on the £15m of cash or 10% restitution as the FCA called it and the judge referenced. Totally unbelievable, it would be funny if it wasn't real.

The issue for them isn't shareholders, its claimants if they lose out. They are vulnerable and the FCA basically said there is no way they understand what they voted on. Rather ironic really, as I think the FCAs understanding was basic in the extreme.

The FCA have put themselves in a difficult place. I noted someone saying it is ridiculous to think they will be sued. If all thosev70k odd borrowers who approved the scheme realise they are not getting their quarter of a billion pounds I am sure someone will represent them on a no fee basis against the FCA. The first rule of suing someone is make sure they can pay, otherwise it is all a bit academic. I think I could win a case against the FCA given the statements they made in court. I also think the FCA regulating Amigo and now some other part representing the best interests of claimants against Amigo is a huge conflict. The Board of Amigo presented a reasonable restitution and evidenced it with a cash projection. The problem is that it does require some financial and financing knowledge to understand their case as its a little complicated. They let themselves down in their explanation of the facts. I think they can only appeal on the basis of law and cant really do so arguing we are sorry but didn't explain ourselves properly can we try again. Don't think the HC works like that. It is a farce though, thats for sure.

Amigo has about £80M of book equity at Dec. If they are reducing a loan balance and it is in a secured pool they need approval of a first fixed charge holder or they remove it from the pool which means it is financed by shareholders. Because shareholders equity (book value) is now so small they have very little wriggle room. They are running out of options and hence why they presented Insolvency as real if claimants didnt feel £230M odd plus whatever 15% of profits will be for 4 years is not enough. Soon enough they will have no option to remove loans from secured pools and then they are doing only what they are told by the secured lenders. Thats how it works. FCA/FOS/HC thinking they can control things are misguided and the FCA thinking there is no constraint on timing just isn't real

Shareholders equity can be represented my many different assets not just cash. I'm afraid it was and currently is shareholders equity. Amigo have made provision against this of over £230M because they expect in time judgements to this amount will be found against them. This isn't proven yet but an expectation. Amigo can make all the provisions they like without secured lender permission as its not real until its utilised. The entries when the loan is reduced are credit gross loan, debit provision, thats when any secured lender gets to intervene. You cant just reduce his loan balance and notify the borrower that their loan balance is reduced without their permission. If you think IFRS accounting and UK commercial law are wrong that's one thing but do not think for a moment that the FCA are doing anyone any favours. The secured lenders couldn't give a toss what the FCA/FOS/ or anyone else thinks SHOULD happen. They will be the ones that decide what does actually happen as you can already see with the securitisation pool.

Its not strange its WRONG. The correct measure of shareholder losses is not the market value of an illiquid stock but the book equity. There is no debate on the level of losses when you use this metric, the share price depends on your 2 dates and I think means nothing as it is just retail accounts punting with very limited knowledge and certainly no capability to truly value Amigo which is impossible and has been for a while

Every loan in Amigo is secured to either the securitisation lenders or the Bondholders. The securitisation lenders are getting all cash and not even allowing their loans make a contribution to operating expenses. A fixed charge on the rest means NO ONE not even the Queen herself can reduce the asset supporting that fixed charge without their permission. What do you not understand about the complaints re-imbursement is an UNSECURED liability of Amigo. There isnt a hope in hell now that the secured lenders will allow their cash or their assets to be reduced given the close call cashflow schedule Amigo presented to court. It just wont happen and the HC sure as hell are not going to overturn such a basic building block of commercial law in the UK. The unsecured creditors wont even get the balance adjustment now without a deal, thats £151M as she currently stands. This is the stupidity of this situation, the utterly ridiculous focus on £15M which is only really relevant to past borrowers

shareholders have already borne a reduction in their book value of £85m plus the remaining provision of £151M, all that has hit shareholder equity i.e losses to equity. What do you not understand about that? You are like the FCA legal counsel, clueless on the financials

He still doesn't understand what it means to be a secured creditor particularly with a fixed charge. Everything he said is rubbish.

What you are saying is FACTUALLY wrong. Amigo can make all the provisions they like but when they inform the borrower than a loan balance will be reduced this needs secured bondholder approval as they have a fixed charge on the loans and a floating charge on cash. Reducing the loan balance reduces the secured bondholder security which they have to give permission on. That is the one of the purposes of the fixed charge, nothing happens without their permission. This is not going to happen now or at any future point until the £234M is repaid. Making a provision doesn't require this approval, using the provision does.

The claimants were offered and accepted compensation conservatively valued at over £230M with £80 odd paid. the FCA basically said 10% was not enough based on the £15M cash and ignored the balance adjustments and the future profits. This was factually wrong and self serving. I think claimants would have a case as it was a change of stance by senior management that resulted in the objection. Their arguments were plain wrong, the claimants shouldn't suffer because they didn't understand how Amigo is financed. They are Amigo's regulator after all so that would be a really stupid argument. If this goes badly they are target number one and deserve to be.

If I were a claimant I would put a value of say of say £50M from 4 years profits and go after the FCA for £215M plus costs. That's a nice position for Claimants as all they have to do is show the FCA played roulette with the compensation offered by Amigo and approved by claimants. FCA are in a very dangerous place and they only have the "senior management" to blame as the case handlers had agreed a different approach. The FCA regulating Amigo and now playing games for claimants is a huge conflict. Dumb, very dumb

The moratorium is not a support to anyone. If the moratorium was lifted tomorrow the Board could not continue to make payments to claimants as they don't have the cash. They could make loan adjustments if the secured creditors agree which I doubt they will now. So the FCAs intervention has lost claimants access to the still remaining £151M, the £15m cash and whatever cash comes from future profits. It has done nothing positive for shareholders and put the secured creditors on heightened alert to agree to nothing that diminishes their already very tight capacity to get repaid in full. The FCA has done nothing positive for claimants, at the moment they are down £165M (150+15, lets assume no value from future profits). If the FCA were to allow claims to be made, as a secured creditor I would try and find a way to take control with Administrators appointed by me. I would grab the cash, fire most employees leaving a small team to help get cash from the remaining loans. I would offer big discounts on the loans to any borrower repaying the loan within 21 days. The remaining loan book at £300M or so and if I grabbed £150M of the cash would mean I needed £85m or so from that book. I would offer 50% discounts for immediate repayment to end this as quickly as possible. You are in dream land if you think FCA has done the claimants or shareholders a favour. The only favour was to rattle the cage of the secured. They have been idiotic and my hope is claimants come after them for the lost compensation because if this goes the two main actors are to blame, Amigo and FCA. As Amigo will have nothing I would go after the FCA.

Amigo lends money. Whoever said it, was talking about valuing AMIGO at 20x EBITDA. Total crap.

First, NOBODY who knows the markets uses EBITDA to value a finance co, its ludicrous as you are not accounting for cost of goods sold, interest. Dream on if you think Amigo a fin tech, not in a million years. Its a few steps away from a door step lender. Just look at the valuation of the SX7e

Since the financial crisis, lending entities dont have high valuations at all, they struggle to even trade at BV and 7-8 earnings. The S&P trades at 18x and some technology companies at 10x SALES. Unsecured borrowing for Amigo wont be realistic for a very very long time, I doubt ever. The smart money knows the FCA hates the sector

Yes, but only on a secured basis, so the cash from these new loans would go to those secured lenders not to fill holes from previous financing. Amigo wont get any unsecured debt with its track record of that I am 100% sure

It is true that there is no restriction "in the security" i.e the floating charge allowing management to use the cash. There was one piece of other evidence though, the cashflow schedule presented by Amigo's board. This shows that after allowing for £15m of upfront cash the Board believes they will just make it to repaying the Bond in Jan 2024. No other cashflow schedule was presented by anyone else and its simple maths that if you spend more now on a new process then you will have less in Jan 2024. That's where the problem is, can the Board spend more now if they believe they will be short. I would say no, because they have a duty to these stakeholders too. They cant really argue now they didnt know they would be short because if in Jan 2024 they are short as a secured lender I would sue them and say they knew they would be short and use their own cashflow schedule against. I would also sue the FCA as well for probagating this idea and here again I would present a transcript of the hearing as evidence. The Board are now trapped by their own evidence. Doing something they know will leave a shortfall might make them personally liable and negate any Board insurance cover they have

prolee, thats not necessarily true. It might just be non payment allowing exercising their security. At the moment thats my best guess as they haven't done anything. That means only Jan 15 2022,2023 and 2024 are the dates when they can take control if payment not made. Given the £165M cash thats not relevant and they are not lkely to object to a payment to themselves