Amigo Holdings PLC gets qualified go-ahead for compensation cap scheme

’s () controversial scheme to cap its liability for compensation over the sale of guaranteed loans has been allowed by financial regulator the FCA but with heavy qualification.

In a statement, Amigo said: “The FCA notified Amigo and SchemeCo after market close on 23 March 2021 that, having completed its assessment of the terms of the Scheme, while the FCA does not support the Scheme, it is not currently proposing to take any additional regulatory action that might stop the Scheme were it to be agreed by the Scheme creditors and sanctioned by the Court.”

The FCA also has reserved the right to change its position, Amigo noted and had told the company it was unhappy that customers with valid redress claims in the Scheme stand to receive significantly less than the value of their claims and also with the methodology for claims assessment.

Amigo has been swamped by complaints about its guaranteed loans with the number soaring to almost 13,000 in the second half of 2020 according to the Financial Ombudsman.

Under the proposed scheme of arrangement, creditors will receive a share of a pot of between £15-35mln plus payments out of any profits made by the business over the next four years.

Failure to approve the scheme will likely see the firm go into administration, Amigo has said.

The scheme’s creditors are Amigo’s 700,000 past customers, 300,000 present customers and the Financial Ombudsman Service.

Several senior executives at the company were recently awarded share options through a new long-term incentive plan which has added to the controversy over the scheme of arrangement.

The Court convening hearing for the Scheme is listed for 30 March 2021 and if passed by the Scheme creditor vote, the final Court sanction hearing is expected to be held on 19 May 2021.

The scheme requires 50% of creditors who vote to vote in favour and the value to be at least 75% of the claims. Court approval is required if the vote is successful.

Gary Jennison, Amigo’s chief executive, said: “We are grateful for the work of the FCA and the time they have dedicated to understanding and enhancing Amigo’s Scheme of Arrangement.

“Their letter is a significant step forward ahead of the first court hearing next week.  We look forward to our customers having an opportunity to vote and support the Scheme, which after careful consideration, we believe, is the only real option for customers who are due redress to receive cash compensation.”

Peel Hunt added that shares in Amigo are up 50% year to date but is still trading at a very low share price and this news appears positive, reducing the possibility that the equity is worth zero.

“We also view this as broadly positive for other Guarantor Loan businesses facing FCA scrutiny, eg Non-Standard Finance.”

Shares in Amigo jumped 15% to 14.7p with Non-Standard Finance up 5% at 5.98p.

PLC (), which is under investigation after complaints about is doorstep lending business and also planning a scheme of arrangement shed 2.8% to 209.4p.