Amigo survival options ‘diminish significantly’ as lender scrambles to raise £45m emergency cash
Beleaguered lender Amigo said its survival options had “diminished significantly” today as it updated on efforts to raise £45m in a bruising meeting with shareholders.
Amigo has been hunting for investors to underwrite an equity raise as part of its plans to restart its full operations next year.
However, in a meeting with shareholders this morning, bosses said after approaching 200 potential backers it had failed to secure the required cash, and warned that a “fallback solution” of an orderly wind-down of the business was the only viable alternative if investors failed to materialise.
Raising the cash was “achievable”, they added, but the “funding gap is large and options to fill that gap have diminished significantly”.
The Bournemouth-based sub-prime lender has been on a survival footing since it was suspended from lending by the Financial Conduct Authority after failing to conduct proper affordability checks and for dishing out high-interest loans to borrowers with shaky credit histories.
Amigo secured high court approval for a redress scheme last year and was given the green light from the FCA to restart lending in October.
In a statement last month, the FCA publicly censured the firm but spared it a £72.9m fine on the grounds it would prevent the firm from paying out compensation to customers who had been caught up in the loan mis-selling scandal.
Shares in the firm plunged as much as 27 per cent today after the meeting before recovering to trade down 8.5 per cent at 12:30pm, at 2.29p per share.
As part of its efforts to restart lending in full, Amigo has pivoted away from its traditional customer base and launched new brand RewardRate, which it says offers “more affordable, responsible and flexible finance for underserved consumers who currently have few borrowing options”.
In a statement ahead of the meeting, Amigo said demand for the new brand “remains strong” but its conversion rate for new loans was “challenging”.
The run rate for monthly loans originations currently sits in excess of £1m, the firm said.