The Sunday Telegraph - Money & Business
Hedge funds poised to seize control of Amigo
Bondholders’ move means hundreds of thousands of customers mis-sold loans could lose compensation
AMIGO, the sub-prime lender, is at risk of being pushed into the clutches of hedge funds, depriving compensation from hundreds of thousands of people who were mis-sold high interest loans.
The chief executive of the Londonlisted firm has issued an impassioned plea to avoid the company being seized as it races to file its accounts. Amigo is understood to have just 12 [from Sunday] working days to publish its results before a group of US bondholders, understood to include Apollo Global Management, Polygon Capital and York Capital, can take control of the lender.
Company estimates indicate that the hedge funds, owed more than £200m, would be paid out almost in full if Amigo is forced into administration, according to City sources.
The forecasts leave little money to repay unsecured creditors such as compensation to claimants that were missold loans in the past. The company is working with accountancy firm PWC and investment bank PJT Partners.
Gary Jennison, chief executive of Amigo, said: “In the last 10 months we’ve built an entirely new management team at Amigo to address the historic problems facing the business. We’re currently working night and day to do everything we possibly can to reach a solution that is best for all of our stakeholders.
“We want a scheme of arrangement that delivers fair recompense to customers; we want to deliver returns to our 8,000 individual shareholders and security to our bondholders; we want the regulator to be satisfied with our actions and we want to keep our 220 remaining staff in employment. In future we want to stay in business to serve the 15m British people that can’t get a loan from a high street bank and can’t get a loan anywhere else at less than 100pc [interest rate].”
Amigo was left fighting for survival after the High Court rejected plans to cap compensation payments earlier this year. The Financial Conduct Authority (FCA) also opposed the plans.
Company insiders estimate that as many as one million lenders and guarantors could make claims.
Without capping the payouts, compensation would be paid on a firstcome, first-served basis, meaning there may be insufficient reserves to pay those at the back of the queue, the company says.
Amigo bosses are working on a revised court submission that could increase the pot to pay redress. They are
‘We want to stay in business to serve the 15m British people that can’t get a loan from a high street bank’
also working on a contingency plan to wind down the business.
Hopes have been raised that the High Court will back revised proposals after rival Provident Financial received the support from judges for a similar scheme of arrangement this month.
But the filing of accounts for the year to March 2021 has become a much more pressing issue. Amigo was sent a letter by the FCA hours before filing its financial statements by a July 29 deadline. The regulator “raised some issues which could impact on forward looking statements contained within the annual report”, forcing Amigo to delay publication, triggering a breach of its loan agreement with bondholders.
The hedge funds, advised by Houlihan Lokey, then granted the company an extension until Sept 2, after which they can take control of the company.