Shares in UK subprime lender Amigo plunged in fears the company could collapse after the High Court refused to approve it. Controversial proposals to limit customer claims..
After judge Justice Miles, Amigo fell 55% to 8.3p. Judgment “I wasn’t happy that the court should approve the plan,” he said. The recent sharp fall in stock prices comes after a big loss last week, as traders expected the ruling.
The news sent the share price crashing more than half to 2.40p in early trading. Four years ago they were trading at close to 300p.
Under the new proposals Amigo intends to raise £97million to repay victims of its irresponsible guarantor loans and a further £15 million to contribute to the scheme.
The scheme requires court approval and will then be put to shareholders if it is approved.
Amigo won a majority of 95% of the votes At a meeting on May 12, the judge agreed with a scheme from customers about a proposal to pay compensation to a borrower who mistakenly sold a loan, but the judge said the turnout was very low at 8.7%.
Its previous scheme to repay customers – which capped compensation at £35million – was rejected by the High Court.
The plan could have seen successful complainers be handed as little as 5% to 10% of their claim if successful.
The court demanded higher payments to customers and for shareholders to lose their stake in the company if customers were not able to be paid in full.
The lender’s drawn-out dispute is over its controversial guarantor loans which it was accused of offering with an interest rate customers would never have been able to pay back.
The bailout plan includes restrictions on compensation paid to borrowers and has been criticized by UK financial regulators, MPs and debt activists for being unfair to the poorest borrowers in the UK.
“I understand why directors are looking for ways to deal with unsustainable levels of bailout claims,” Miles said.
He added: “Some form of restructuring of the group is clearly desirable and really needed. But the question is whether this scheme should be approved in all situations. I accepted my submission. Financial Conduct Authority Relief creditors lacked the information or experience necessary to be able to adequately evaluate alternative options that they could reasonably use. Or understand the rationale for Amigo’s request to sacrifice most of the bailout claims while Amigo’s shareholders were allowed to hold shares. “
The judge added that the court’s dismissal of Amigo’s proposal accepted the FCA’s submission that “it probably would not lead to the group’s imminent bankruptcy.” There is no evidence of an immediate (or medium-term) liquidity crisis. “
The FCA said it was carefully considering the court’s ruling and Amigo’s response.
Watchdog said he wanted to get justified compensation for better, fairer deals with Amigo’s customers. “We believe that a fairer compromise could have been offered to our customers, but it wasn’t,” he said.
“The FCA, in this case, needs to share with the court the view that the proposed scheme is inherently unfair in order to maintain the company by imposing a disproportionate burden on customers rather than shareholders and bondholders. I thought there was. “
Amigo CEO Gary Jennison said the company is considering all options, including appeals. “Amigo is very disappointed that the scheme was not approved, despite 74,877 customers who voted in favor of the scheme, which accounts for more than 95% of the people who voted.” It was.
Amigo charges 49.9% interest and requires the borrower to act as a guarantor for friends and family, but is received by many of the 1 million former and current customers who mistakenly sold the loan. The concern that it could be done ignited. 5% to 10% of successful claims as part of a plan to limit the compensation pool to up to £ 35m and 15% of profits over the next four years.
Campaign participants I opposed Proposal to give board directors the opportunity to earn £ 7m in long-term bonuses as part of a deal.
Amigo says he cannot keep up with the increasing costs of dealing with customer claims through the UK financial ombudsman. Executives say that if the scheme is rejected, the company could collapse into the administration and pay the borrowers to a minimum.