25th May 2021 11:21
(Alliance News) - Amigo Holdings PLC said Tuesday the UK High Court has not approved the guarantor loans provider's scheme to settle compensation claims.
Shares in the Bournemouth-based provider of guarantor loans sunk by 50% in response in London on Tuesday to 9.31 pence. The stock traded at 276.00p less than two years ago.
At the end of December, Amigo pursued the use of a scheme of arrangement, in order to attain certainty on the total liabilities which arise from customer complaints.
It believed that a scheme would prove to be the best vehicle for addressing customer redress claims, but admitted that the plan would not allow all claims arising from unaffordable lending to be paid in full.
The scheme was proposed by Amigo to settle claims following probes from UK regulators into mis-sold loans and the way that Amigo dealt with customer complaints.
The scheme would have made at least GBP15.0 million available to a million past and present customers. There is also the potential for a further GBP20.0 million and annual contributions worth 15% of Amigo's pretax profit over the next four financial years. Some 95% of customers voted in favour of the scheme.
But the UK Financial Conduct Authority decided to appear at the court to oppose the scheme, on the grounds that it is not fair in its current form.
The FCA had previously written to Amigo to highlights its concerns, noting the value of customer claims was significantly reduced, while shareholders are not being asked to contribute, and that Amigo did not negotiate with the claimants before proposing the scheme.
On Tuesday, Amigo said the court has not approved the scheme despite an "overwhelmingly positive creditors' vote" and is now reviewing all options, including an appeal.
Amigo has repeatedly said it would go insolvent and that claimants would get nothing if the scheme failed.
"Amigo is incredibly disappointed that the scheme has not been approved despite the 74,877 customers who voted in support of the scheme, representing over 95% of those who voted. We are currently reviewing all our options and will provide an update at the earliest opportunity," Chief Executive Gary Jennison said on Tuesday.
By Paul McGowan; [email protected];
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