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The share issue is stupid idea, who is going to buy the shares? The share of future profits has a similar economic effect without all the complexity of a share issue. But the fundamental point is Amigo with SOA1 had already covered the estimated claim liability in full albeit in a mixture of balance adjustments and cash. Why overfund this obligation now. Just make the four years unlimited as the reality is it will be mostly covered by year 4 anyway. The share issue is totally daft. The FCA argument the claimants are financially illiterate, why put them on the share register. It will only go one way for them, they will be crewed by the market. Adjust their loan or give them cash thats it. If they dont have the skill to assess whats proposed they sure as hell dont have the skill for the shark infested waters of the stock market. This claim for equity swap with all the complexity of waiting for claims to be established is totally stupid. A typical lawyer answer and a lawyer who doesnt understand the starting position and how markets really work
By the way, shareholder haircut DOES NOT mean dilution of equity, that is just one means of achieving it. Shareholder haircut in general form means transfer from shareholders to someone else. SOA1 was indeed proposing that in a much more significant way then the referenced 10%. Problem was you had 3 people discussing and opining on something they didn't fully understand. Id one the one hand an estimate of the ultimate claims is say £250M and on the other Amigo has set aside/paid or already adjusted loans to £230M + £15M cash+15% of profits, seems pretty balanced to me. Amigo made a real hash of the explanation of this and for a listed company this was gross incompetence. Anyone focusing on the £15m or the quoted 10% (the smallest element element of the deal) just didn't understand SOA1. As the burden of proof was on Amigo, that's 100% Amigo's fault. Amigo did not in any way attempt to reverse the hierarchy, if you think that you don't understand it either. Its about risk sharing between the two exposed classes; shareholders and unsecured. Amigo was rectifying the unsecured in the hundreds of millions not the £15m
I didn't mention the share price, I was noting the shareholder contribution to claimants from the transfer from book equity which is over £230M and is much more significant than the stupid focus on the £15m. The argument the FCA counsel used by referencing the share price as a measure of the pain for shareholders was self serving and totally stupid. The "signalling" argument of share prices should only be used with highly liquid stocks that have market caps in the billions. The share price of "illiquids" says nothing about fair value. Argument of a barrister that knows diddly squat about the markets. That was among one of the stupidest arguments I have heard in a long time and of course Dicker just sat there immobilised with lack of knowledge
The problem is they only have a floating charge at the moment which allows mgmt to move the ash as they think is required while being mindful of their obligation to the secured bondholders on coupon payment dates, 3 left and Jan 2024. This gives mgmt discretion/judgement. Again if I was a bondholder I would have totally lost confidence in this discretion/judgement and hence trying to increase my security
If I was a secured bondholder this would be 100% of my attention, stopping any material amount of cash going out without my explicit permission and I certainly would not approve the continuing gravy train for the professional leeches. They would be my number one target to see off
The shareholder haircut has already been over £230M set aside in the claims provision, £151M balance plus the £84M used in the 9 months to Dec. This is already more than a worst case estimate someone mentioned last night. The claims provision hit the P&L which in turn reduces shareholder equity. This alone makes it equal, then £15M cash and 15% of future profits. How much do claimants want. The big issue was it was for Amigo to prove that what they proposed was fair. It actually was fair, very fair. If you were lent £100 and it is decided you were wrongly treated and the loan is reduced to £50 that is still a claimant compensation and Amigo have committed to an unlimited exercise in this regard. Obviously this only deal with current borrowers but the cash fund can deal with past claimants although they will have a tough case arguing they couldnt really afford the loan if they in fact have repaid it
They are not in default, Amigo would have to release an RNS if they were. I suspect the only EoD is non payment of interest and if I remember right this is an annual pay coupon bond so this is unlikely to be an immediate concern as next interest payment date is Jan 15 2022. The real question on these bonds is whether they are cross defaulted or cross accelerated to the securitisation facility which is veering on default which is being waived by a temporary waiver. If the Std bond is cross deailted to the securitisation facility and the waiver is not renewed on June 25th then the game changes. However as the balance is now low on this facility I think it would be stupid for them to not extend as they are getting all the cash anyway. My guess on what the Stg bondholders will try and do is to get a fixed charge on a large part of the cash so as to reduce their risk to this money disappearing to lawyers, bankers, and the like. Can they do this? Only if the Bond indenture gives them this right or because Amigo breach a continuing rep or warranty which is typical in these documents or if there is a MAC clause. I haven't been able to get the Bond indenture to check this but if I had it, it is a relatively easy exercise.
That's exactly what this is about, rectifying mistakes of the past. You can go all theoretical saying it should never have happened. That gets us nowhere. It did and now it has to be sorted those are the practical realities. I will leave the could have, should have, pyscho babble to someone else.
As I said, the only estimate we have is that the claims liability is £150M. Shareholders have had this knocked off book equity and is sitting in a provision account which will be now used for loan adjustments. The cash is only needed for the penalty side of the restitution. I never said it was charity, its an estimated claim which has already been taken off shareholders. That's a fact and to argue that the figure is £15m is idiotic and demonstrates to me limited understanding of the already accounted for redistribution from shareholders to claimants in due course.
The important thing isnt whether Amigo is in Insolvency now or not, its the fact it is a real threat that they may not be able to control a threat that has gone up because of the FCAs comments
This £150 claims provision is really important because this was taken from shareholders and given to claimants either by balance reductions or in some cases cash. To argue that shareholders have not made a very significant contribution is yet AGAIN plain wrong. Factually wrong, you just need to understand the accounts to see the objective evidence. No mention of this either
That's true but i didnt expect Amigo to not have thoroughly explained their view and the real uncertainties that exist. I thought what they proposed;
1.) Unlimited Loan Adjustments for valid claimants
2.) 15m cash upfront, and
3.) 15% of pre tax accounting profit (not cash profit), reasonably fair . The biggest contribution already booked being the £150m claims provision which can be used for the balance reductions. Not even acknowledged. How could they forget about this. The only answer I can come up with is Dicker has no financial knowledge at all.
I was negative when 95% plus posters wanted JB back with a totally mad plan to fight the FCA AND expand abroad. If JB was back this would definitely be over, 100%. I liked the new CEO as the number one rule is you cant win fighting your regulator. The CEOs folksy style and continual message of wanting to liaise with the FCA was right. BUT if the CEO is nice guy then the CFO needs to be ruthless. Most of the stuff I go on about he should have been on top off and he should have made sure their brief knew it inside out
please bear in mind they are only estimates, as we just don't have enough data to be more precise which as a shareholder really pis..s me off. As far as I'm concerned management work ultimately for shareholders and I just don't trust the capabilities of this lot and I include the hired help, lawyers and RBC. Since when did RBC become a player in the advisory business!
No they don't need to wipe out shareholders but as a going concern with no new lending you need to account for the current £60m approx of annual operating expenses and if it took say 3 years to unwind you can see this eats in to your estimated £200M surplus and so yet again we are back to near zero for unsecured and shareholders for a different reason
Everything. If there is new lending then Amigo has survived and reached a SOA and so you are not talking about my distressed estimate based on buying the book with all the uncertainty around the £150m claim liability. In short it affects what I take off my estimated £300M NBV and the return I want
This is why Amigo was right to point to the risk of insolvency and why they could only afford £15m upfront in cash BUT they did a dreadful job explaining this. I dont know whether the lawyers had any financial knowledge at all but my understanding is that the onus of proof was on Amigo and Judge in his statement kept saying there was no evidence to support the insolvency risk but with the data from 31/12 and some minor assumptions I think it was possible to show this as a real risk, not to be waived away as not worthy of debate, not even a single sentence!