Amigo to be wound down

Amigo Holdings is to be wound down, the embattled mid-cost lender confirmed on Thursday, after it failed to secure backing for a crucial capital raising.

Amigo said its trading subsidiary Amigo Loans would stop lending with immediate effect, with the existing loan book collected during the wind down, which is expected take 12 months.

Staff will now be consulted, although Amigo insisted all would be paid and contractual notice periods honoured, and the board reduced. Amigo employs around 200 people.

The announcement wiped out the stock, and by 0900 GMT it was trading at just 0.22p, an 87% plunge.

The wind down marks the end of a torrid period for Amigo. The guarantor lender debuted on the London market in a £1.3bn flotation in 2018, but it was soon derailed by a barrage of customer complaints over alleged mis-selling. Lending was then restricted at the start of the pandemic before being suspending entirely in November 2020.

It eventually agreed a rescue plan with the Financial Conduct Authority after a lengthy investigation, under which it agreed to pay compensation to creditors and resume lending by February 2023.

The scheme was sanctioned by the high court, and in October Amigo announced that the FCA was happy for it to resume lending, sending the stock soaring. The firm had also moved away from subprime lending, to focus instead on mid-cost loans for people typically excluded from mainstream finance.

The scheme was conditional on a 19:1 capital raise, however, from which a minimum £15m would be paid to the scheme fund for creditor redress, and Amigo said it had been unable to garner enough interest from potential investors to cover the £45m required

It added that alternative solutions had been explored, but it had concluded that the only viable option was to liquidate the business.

Danny Malone, chief executive, said: "This is a very sad day for all our employees, who have worked extremely hard to address historic lending issues and rebuild a new Amigo, our shareholders and wider stakeholders.

"It is also a sad day for creditors due redress, who will now receive a lower level of cash compensation.

"From the beginning we have faced significant challenges in seeking a solution in the best interests of all our stakeholders and have had to make a series of difficult decisions.

"Clearly the economic and market environment has moved against us considerably since our scheme, formulated in late 2021/early 2021, was sanctioned last May. This has severely impacted both our ability to raise capital and the affordability of loans for our potential customers, coupled with tighter lending controls.

"We do not believe there is another viable route forward."