REG - Amigo Holdings PLC - FCA approves return to lending

Amigo HoldingsAnnouncement

13/10/2022 18:00

For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20221013:nRSM8617Ca&default-theme=true

RNS Number : 8617C  Amigo Holdings PLC  13 October 2022

 

13 October 2022

Amigo Holdings PLC

 

FCA approves return to lending

Amigo Holdings PLC ("Amigo" or "the Company"), a provider of mid-cost credit
in the UK, is pleased to announce that it has received approval from the
Financial Conduct Authority ("FCA") to return to lending, under certain agreed
conditions, with immediate effect.

Amigo suspended lending activity to all but key workers in March 2020, at the
onset of the COVID-19 pandemic, ceasing lending altogether in November 2020.
The Company subsequently received a significant number of customer claims for
compensation related to past lending standards. In May 2022, Amigo received
High Court approval for a New Business Scheme of Arrangement (the "Scheme") to
facilitate the payment of compensation to creditors, conditional on regulatory
approval for a return to lending and the completion of a capital raise. If
these conditions are not satisfied by 26 May 2023, Amigo will go into run-off
and will be wound down.

In a letter to the Company from the FCA, dated 13 October 2022, the FCA has
confirmed that it is satisfied that Amigo has met the threshold conditions
required for Amigo to return to lending, initially through the operation of a
pilot lending scheme, which would limit the level of new loans issued for at
least two months. The substantive contents of the letter are reproduced below.

We refer to our recent correspondence regarding the Firm's intention to return
to lending. This letter sets out our current position on the Firm returning to
lending via a lending pilot.

In November 2020 the Firm paused new lending and announced its intention to
enter into a Scheme of Arrangement, to provide the Firm with certainty to the
total liability arising from large numbers of customer complaints. Since this
point, the FCA has assessed the Firm's proposed Scheme of Arrangement's
compatibility with FCA objectives and has been assessing the Firm's proposed
approach to future lending, including whether the Firm is satisfying and can
continue to satisfy the Threshold Conditions.

Our letters of 28 January 2022 and 4 March 2022, and subsequent correspondence
with the Firm, set out our expectations of the Firm and the conditions it was
required to meet (as per our 4 March 2022 letter) in order for us to be
satisfied it was in a position to resume lending. Those conditions are that:

 

(i) the New Business Scheme is sanctioned by the court;

(ii) the FCA is satisfied that the Firm meets FCA threshold conditions;

(iii) outcomes testing of the Firm's new lending system is completed to the
satisfaction of the FCA; and

(iv) dealing with, to the FCA's satisfaction, any other issues that may arise.

 

Alongside those conditions, we set out our expectation that a return to
lending would be limited in volume until the Firm demonstrates to the FCA
(with third party assurance where appropriate) that it is lending in a way
that meets FCA's expectations.

On 12 May 2022 the Firm's redress creditors voted for the Firm's proposed "New
Business Scheme" and the court approved this scheme on 23 May 2022 evidencing
that the first condition is met.

The FCA recognises the significant programme of change the Firm has undertaken
and continues to progress to deliver improvements to the way in which its
business operates including providing fair outcomes to consumers.

Having completed an assessment of the Firm's proposed return to lending, based
on the information provided to date, the FCA is satisfied that the Firm has
demonstrated it is meeting Threshold Conditions, and that it is appropriate
for the Firm to resume lending on a pilot basis, with immediate effect. The
duration of the lending pilot will be for a period of two months, at limited
lending volumes (to volumes previously agreed with the Firm).

The lending pilot will enable the Firm to test its proposed return to lending
policies and procedures in a controlled environment, in which the Firm is
expected to undertake the agreed robust outcomes testing to demonstrate that
its new systems and controls meet applicable FCA regulatory expectations in
practice, and that the Firm can continue to meet the Threshold Conditions,
should lending volumes be increased post pilot.

During the lending pilot period, we expect the Firm to keep the FCA appraised,
in a timely manner, of all of the agreed relevant matters relating to the
pilot, which includes material developments such as modifications or changes
the Firm proposes to make to its approach as a result of its outcomes testing.
The FCA expects the Firm to inform it of any additional relevant matters
relating to the pilot that may arise.

The FCA recognises that a full return to lending is central to the New
Business Scheme. Following the end of the pilot lending phase, the FCA will
consider the impact on consumers of the Firm returning to lending on a wider
scale, and whether the results of the outcomes testing demonstrate that the
Firm is able to continue to meet FCA expectations, therefore satisfying the
second and third conditions.

The FCA reminds the Firm of its responsibility to act in accordance with our
Principles, Rules and Guidance. We maintain our position that, subject to the
Firm meeting the conditions set out, we expect a full return to lending to
take place no later than nine months after the New Business Scheme Effective
Date.

The FCA's decision as to the Firm's ability to return to lending is based on
the information the FCA is aware of at present. The FCA continues to reserve
its position should facts or circumstances change, or new facts emerge. This
could include taking action to impose a requirement on the Firm's regulatory
permissions which restricts it from continuing its business, for example,
should it be identified the Firm's proposed approach to lending does not
provide fair consumer outcomes.

A full copy of the FCA's letter will be published by the FCA on its FCA
website.

The Company is pleased to have met the FCA's threshold conditions. Under the
terms of the FCA's notice, Amigo will undertake further customer outcomes'
testing, led by a third party, during the initial two month pilot lending
phase and a required period for assessment. If the FCA is satisfied with the
outcome of this pilot phase, Amigo will still be limited to a maximum of £35m
cumulative net originations until a further minimum £15m Scheme contribution
from the proposed capital raise is paid into the Scheme fund, by no later than
26 May 2023.

As previously announced, under its new RewardRate brand, Amigo will offer a
revised guarantor loan product, starting at 39.9% APR, and a non-guarantor
unsecured loan, starting at 49.9% APR, both of which have been specifically
designed for its target market. Amigo's target customer base includes
customers who: (i) have robust underlying credit profiles but have been
underserved by current market participants due to having limited credit
history as a result of their age or recent arrival in the UK; or (ii) have a
low credit rating due to the impact of a life event or historic credit
impairments. Both products will feature an annual, interest-free, payment
holiday and the opportunity to reduce the effective APR down to 34.9%, being a
5% and 15% reduction, respectively, over the term of the loan, dependent on
the product. These innovative features reward customers for on-time payments,
encouraging better financial management and facilitating a long-term
improvement of customers' credit scores and financial mobility.

Volumes of guarantor loans are expected to be higher initially with the
non-guarantor unsecured loan becoming the larger product in the medium term.
If the pilot phase is successful, subsequent originations are expected to
reach approximately £200m a year in year two and grow to over £350m in year
four. The targeted blended net loan book yield is expected to increase to 38%
as the proportion of non-guarantor unsecured loans rises. Amigo's business
model assumes an impairment to revenue ratio in the low 30% range and a cost
to income ratio (before finance costs) in the low 20% range in the medium
term.

Capital Raise Plans

The FCA's decision to approve a return to lending is an important milestone
for creditors owed redress by Amigo, as it meets one of two Scheme conditions
which must be fulfilled. The second condition is the completion of a capital
raise by 26 May 2023, followed by the contribution of a minimum of £15m
payment to the Scheme fund for creditor redress.

As set out in the Company's AGM statement on 28 September 2022, the Board
expects to propose a capital raise of approximately £40m, which will include
the 19:1 ordinary share issue mandated by the Scheme. In addition, Amigo will
raise debt to support future growth. The Company will seek to facilitate
meaningful participation by its existing shareholders on a pre-emptive basis,
underwritten by one or more institutional investors whom it expects to account
for the majority of the capital raise. The capital raise process has
progressed to formal marketing to potential new investors.

Amigo continues to provide information to the FCA with regard to its
investigation. The Company has responded to a number of information requests
and is hopeful that the investigation will be concluded prior to the
completion of the capital raise.

Commenting, Danny Malone, Chief Executive, said:

"We return to lending with FCA approval as a changed company in terms of our
values and the way we operate with a focus on supporting financial inclusion
and mobility for customers. Our new RewardRate product set has been designed
with this in mind and once the trial phase is complete, we believe it will be
an important new entrant to the mid-cost regulated market.

"A successful pilot will also move us a step closer to paying out compensation
to redress creditors under the terms of the Court sanctioned Scheme of
Arrangement. Together with our advisers we are working hard on meeting the
final condition, namely a successful capital raise by May 2023."

This announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (EU) 596/2014. The person responsible for this
announcement is Roger Bennett, Company Secretary.

Enquiries

 Company
 Amigo Holdings PLC              investors@amigo.me
 Kate Patrick                    Head of Investor Relations
 Roger Bennett                   Company Secretary

 Media enquiries                 Amigoloans@lansons.com
 Tom Baldock                     07860 101715
 Ed Hooper                       07783 387713

 Peel Hunt LLP                   020 7418 8900
 Andrew Buchanan
 Oliver Jackson
 Sam Milford

 Ashcombe Advisers LLP           020 7529 5800
 Andreas Wesemann
 Adrian Hobcroft

 

About Amigo Loans

Amigo is a public limited company registered in England and Wales with
registered number 10024479. The Amigo Shares are listed on the Official List
of the London Stock Exchange. Amigo has provided guarantor loans in the UK
since 2005, offering access to mid‐cost credit to those who are unable to
borrow from traditional lenders due to their credit histories. The guarantor
loan concept introduces a second individual to the lending relationship,
typically a family member or friend with a stronger credit profile than the
borrower. This individual acts as guarantor, undertaking to make loan payments
if the borrower does not. Amigo was founded in 2005 and grew to become the
UK's largest provider of guarantor loans. From October 2022, Amigo will offer
guarantor loans and non-guarantor personal loans under its RewardRate brand.
Both products will reward customers for on-time payments with an annual,
interest-free, payment holiday and the opportunity to reduce the effective
APR, encouraging better financial management and facilitating a long-term
improvement of customers' credit scores and financial mobility.  Amigo Loans
Ltd and Amigo Management Services Ltd are authorised and regulated in the UK
by the Financial Conduct Authority.

Forward looking statements

This announcement contains certain forward-looking statements. These include
statements regarding Amigo Holdings PLC's intentions, beliefs or current
expectations and those of our officers, Directors and employees concerning,
amongst other things, our financial condition, results of operations,
liquidity, prospects, growth, strategies, and the business we operate. These
statements and forecasts involve risk, uncertainty and assumptions because
they relate to events and depend upon circumstances that will or may occur in
the future. There are a number of factors that could cause actual results or
developments to differ materially from those expressed or implied by these
forward-looking statements. These forward-looking statements are made only as
at the date of this announcement. Nothing in this announcement should be
construed as a profit forecast. Except as required by law, Amigo Holdings PLC
has no obligation to update the forward-looking statements or to correct any
inaccuracies therein.

Additional Information

This announcement is not intended to, and does not, constitute or form part of
any offer, invitation, or the solicitation of an offer to purchase, otherwise
acquire, subscribe for, sell, or otherwise dispose of, any securities, or the
solicitation of any vote or approval in any jurisdiction, pursuant to this
announcement or otherwise.

This announcement constitutes notice by Amigo Luxembourg S.A. (the "Issuer")
to the holders of the Issuer's 7.625% Senior Secured Notes due 2024 (for the
notes issued pursuant to Rule 144A of the United States Securities Act of
1933, ISIN: XS1533928468 and Common Code: 153392846; for the notes issued
pursuant to Regulation S of the United States Securities Act of 1933, ISIN:
XS1533928625 and Common Code: 153392862) (the "Notes") issued pursuant to
pursuant to Section 4.03(a)(3) of an indenture dated January 20, 2017 among,
inter alia, the Issuer, the guarantors named therein and U.S. Bank Trustees
Limited, as trustee and security agent. Amigo Holdings PLC is the indirect
parent company of the Issuer. This announcement shall constitute a "Report" to
holders of the Notes.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
 or visit
www.rns.com (http://www.rns.com/)
.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
.   END  REAEAKEDFLXAFFA