5th Feb 2021 21:16
(Alliance News) - Moody's Investors Service on Friday downgraded Amigo Holdings PLC's corporate family rating to Caa1 from B3 and placed it on review for further downgrade.
This reflects the ratings agency's view that Bournemouth-based guarantor loans provider Amigo faces "heightened solvency risks following a surge in customer complaints". Amigo has indicated it could be unable to fully redress complaints and is at risk of becoming insolvent if its proposed scheme of arrangement is not approved.
Amigo has incorporated a new subsidiary for the purpose of paying redress to customers in relation to historic loans as well as liabilities owed to the UK Financial Ombudsman Service.
The redress claims mostly relate to affordability, but also include historic loan-related claims. Under the scheme's terms, Amigo would create a GBP15 million to GBP35 million compensation pool plus a cash contribution based on pretax profit for the next four financial years to March 2025. A court hearing relating to the scheme is scheduled for March 30, 2021.
Moody's also said this downgrade: "Captures the uncertainties regarding the balance sheet composition, and the magnitude of the economic value loss in the coming months, as well as the senior secured bonds' priority ranking security interest."
Moody's changed its outlook on all issuers to ratings under review, from negative.
Shares in Amigo closed 1.8% lower in London on Friday at 6.70 pence each.
By Anna Farley; [email protected]
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