Amigo shares plunge on fresh dilution concerns
By Josh White
Date: Monday 29 Nov 2021
(Sharecast News) - Guarantor loan company Amigo proposed a new plan to cover its liability on Monday, including a new equity raise, sending its shares tumbling on dilution concerns.
The London-listed firm said in its half-year results that it had submitted a revised offer to its independent customer committee, with two different plans to cover unaffordable lending claims.
One option was a managed write-down of the Amigo Loans business, while the other consisted of a successful equity raise and the resumption of new lending.
"While neither of our proposed schemes is expected to satisfy the liability owed to redress creditors with valid claims in full, the contribution to the new scheme will be significantly increased," Amigo said in its statement.
"This is, in large part, due to improved collections relative to the assumptions made for the first Scheme, in December 2020, when the impact of Covid-19 remained highly uncertain, as well as the delayed implementation of balance adjustments on the loan book.
"Amigo will be proposing an equity raise alongside the scheme to support the future business."
That, the board said, was likely to result in "material dilution", which would lead to existing shareholders owning a "much smaller proportion" of the group if they did not take up their rights.
"The board is also considering an early part repayment or repurchase of the senior secured notes.
"The next step will be to issue the practice statement letter to relevant creditors explaining the options for a second scheme.
"The court process will then begin, which is estimated to take at least four months."
Amigo said the sanctioning of a new scheme was increasingly urgent.
"Without an approved scheme, Amigo expects to have to file for administration or other insolvency process."
Looking at its financial results for the six months ended 30 September, Amigo reported a 38.8% fall in revenue to £56.5m, while it swung to an adjusted profit after tax of £2m from a loss of £58.1m a year ago.
Basic adjusted earnings per share came in at 0.4p, compared to losses of 12.2p in the first half of the last financial year, while net borrowings swung to a positive £2.1m from a negative £265.5m.
At 0848 GMT, shares in Amigo Holdings were down 22.52% at 8.29p.
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