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Amigo Holdings PLC (AMGO)

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Monday 06 December, 2021

Amigo Holdings PLC

Scheme of Arrangement Update

RNS Number : 6484U
Amigo Holdings PLC
06 December 2021
 

6 December 2021

Amigo Holdings PLC ("Amigo" or the "Company")

Scheme of Arrangement Update

As part of the Board's pursuit of a new Scheme of Arrangement ("Scheme") and after extensive negotiations with our Independent Customer Committee ("ICC"), the Board issued a revised Scheme proposal to the ICC on 12 November 2021. The revised offer incorporated two distinct Schemes; the first, the 'New Business Scheme', which is contingent on new lending restarting and Amigo completing a successful equity raise. The second, a managed wind-down of the Amigo Loans Ltd business under a Scheme framework ("Wind-Down Scheme").

 

The ICC has now confirmed its preference for the New Business Scheme. The ICC shares the Board's view that the New Business Scheme will provide creditors with greater returns than the Wind-Down Scheme.

 

The Board intends to ask creditors to vote on both options, and if both options are approved by creditors, to then submit both options to the Court for sanction. The Court will be asked to consider the New Business Scheme for sanction before it considers the Wind-Down Scheme, because the New Business Scheme is the preferred option of the ICC and the Board. If the Court does not sanction the New Business Scheme, the Court will be asked to sanction the Wind-Down Scheme as a fall-back.

 

In the event the Court sanctions the New Business Scheme, Amigo is proposing initial cash contributions totalling £97m from internally generated resources, alongside a further contribution of £15m, being part of the proceeds from a new equity and capital raise. The initial cash contribution compares to an amount of up to £35m in the previous scheme proposal. As detailed in Amigo's announcement of its financial results for the half year, released on 29 November 2021, a number of factors, including the greater clarity the business now has on the impact of Covid-19, have contributed to its ability to significantly raise the initial cash contribution. The proposed initial cash contribution also reflects the lower expected balance adjustments resulting from continued collections on  the loan book compared with when the previous Scheme was proposed and assumes future interest savings of up to £34m from a possible early redemption of a significant proportion of the outstanding senior secured notes.

 

While details of an equity raise to partly fund a return to new lending have not yet been finalised, the £15m contribution to the Scheme is expected to be funded from an equity raise and new capital commitments of between £120m and £300m, of which it is hoped to raise a minimum of £70m in new equity. It is required that the new equity raise must be completed within a year of the sanction of the Scheme by the Court. 

 

The Practice Statement Letter ("PSL") explaining both Scheme options and stating the ICC's preference, will now be sent to the Financial Conduct Authority ("FCA") for review. This could result in further changes to the proposal and to the PSL before it is sent to the relevant creditors. Amigo is hoping to send the finalised PSL to customers before the end of the calendar year.

While the Board is pleased that the ICC has confirmed its preference for the New Business Scheme, the Board is keen to emphasise that this is just the first step in a multi-step process and a number of hurdles remain before a Scheme can be sanctioned. Once the PSL is circulated, the Board will initiate the Court process which will include a creditor vote on both options. The Court process is expected to take at least four months. For the preferred New Business Scheme to complete, once sanctioned it will require both a successful equity raise and an FCA approved return to lending. If these conditions are not met, the Board will look to implement the managed wind-down of the Amigo Loans business.  Amigo has agreed with the ICC that the total net new lending under the New Business Scheme will not be more than £35m until the conditions have been met and £112m has been paid into the Scheme fund. Amigo is also subject to an FCA enforcement investigation that has not yet been resolved. The outcome of the FCA investigation could result in a fine being imposed on Amigo. The prospects of success of the New Business Scheme would be adversely affected if the FCA investigation results in a fine or is not resolved before capital is due to be raised as part of the New Business Scheme. If neither of the New Business Scheme or the Wind-Down Scheme is approved by the creditors or neither is sanctioned by the Court, Amigo Loans Limited will enter into an insolvency process.

 

We continue to work constructively with the FCA and have set out below the FCA's position in relation to the Schemes, which remains reserved at this time.

The FCA has not yet been provided with final details of the Scheme proposals agreed with the ICC. The FCA is yet to receive both the final terms of the Schemes or drafts of the explanatory materials to be shared with creditors prior to any vote on the Schemes.  The FCA has therefore not completed its assessment of the Schemes.  The FCA has informed the firm that it reserves the right to take any action as it may consider appropriate, including to oppose the Schemes in court, once the terms of the Schemes have been finalised and it has been provided with all of the information requested from Amigo regarding the Schemes, or otherwise.

 

Further, the FCA continues to assess whether Amigo is failing (or is likely to fail) to satisfy the FCA's threshold conditions (minimum standards all authorised firms are expected to meet) and its proposed approach to future lending. In light of the further analysis that the FCA can be expected to complete, the FCA has informed Amigo that there is a risk that the FCA may impose a requirement on Amigo's regulatory permissions which restricts it from continuing its business and which affects SchemeCo's ability to implement the Scheme.

 

Gary Jennison, CEO of Amigo, said: "We are pleased that the Independent Customer Committee has confirmed its preference for our New Business Scheme and that we can now take the next step to achieve a way forward for Amigo's creditors and other stakeholders. We have listened carefully to its views over a number of months, alongside addressing the concerns raised by the High Court and the regulator last May, and I would like to thank its members for the considerable time and commitment they have shown in helping us seek a fair outcome for all creditors.

 

"We modelled our first Scheme proposal based upon forecasts of a severe impact from Covid-19 upon our business. In the event, Amigo's trading performance in terms of collections and impairments has been better than expected throughout 2021 and the size of the loan book has roughly halved in that time with a further 12 months' worth of collections. Therefore, although the business remains insolvent, Amigo is in a position where it can contribute a significantly higher sum to those creditors due redress should we be able to secure their support, the approval of the Court and then subsequently complete a successful equity raise. This is a complex process which, given our financial position, provides no perfect path for either creditors or existing shareholders but we are an important step closer today to addressing the historic lending issues we face."  

ENDS

Additional Information

This announcement is not intended to, and does not, constitute or form part of any offer, invitation or the solicitation of an offer to purchase, otherwise acquire, subscribe for, sell or otherwise dispose of, any securities, or the solicitation of any vote or approval in any jurisdiction, pursuant to this announcement or otherwise.

This announcement constitutes notice by Amigo Luxembourg S.A. (the "Issuer") to the holders of the Issuer's 7.625% Senior Secured Notes due 2024 (for the notes issued pursuant to Rule 144A of the United States Securities Act of 1933, ISIN: XS1533928468 and Common Code: 153392846; for the notes issued pursuant to Regulation S of the United States Securities Act of 1933, ISIN: XS1533928625 and Common Code: 153392862) (the "Notes") issued pursuant to pursuant to Section 4.03(a)(3) of an indenture dated January 20, 2017 among, inter alia, the Issuer, the guarantors named therein and U.S. Bank Trustees Limited, as trustee and security agent.  Amigo Holdings PLC is the indirect parent company of the Issuer. This announcement shall constitute a "Report" to holders of the Notes.

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014. The person responsible for this announcement is Roger Bennett, Company Secretary.

 

-ENDS

Contacts:

Amigo Holdings PLC  [email protected]    

Kate Patrick    Head of Investor Relations 

Roger Bennett   Company Secretary 

 

Media enquiries  [email protected] 

Tom Baldock                   07860 101715

Ed Hooper     07783 387713

Laura Hastings                  07768 790752

 

 

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