REG - Amigo Holdings PLC - Update on New Business Scheme

Amigo HoldingsAnnouncement

28/06/2022 07:00

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RNS Number : 3716Q  Amigo Holdings PLC  28 June 2022

 28 June 2022

 

Amigo Holdings PLC

("Amigo" or the "Company")

 

 

Update on New Business Scheme - Amigo plans new lending proposition under
different brand

 

Following the sanctioning of the New Business Scheme of Arrangement by the
High Court in May, Amigo Holdings PLC (LSE: AMGO) ("Amigo or the Company")
today announces initial details of a new lending proposition, which the
Company intends to bring to market, subject to Amigo receiving consent from
the FCA to return to lending.

Throughout the year, the Board has pursued a Scheme of Arrangement ("Scheme")
to deliver the best possible outcome to redress creditors as it seeks to
address Amigo's historic lending complaints liability. The Scheme was
sanctioned by the High Court in May 2022 and the preferred solution is
contingent on lending restarting by 26 February 2023 and Amigo completing a
successful equity raise by 26 May 2023.

The new proposition will trade under a new brand, RewardRate. It aims to offer
more affordable, responsible and flexible finance for underserved consumers
who currently have few borrowing options. RewardRate also seeks to provide a
pathway out of higher cost finance to cheaper credit by enabling those who
make their loan payments on time to reduce their APR by up to 15 percentage
points. In shaping the proposition, Amigo's new management team has taken
learnings from Amigo's past to ensure a customer-centric compliant and
responsible culture is at the core of the business as well as an improved
underwriting process with enhanced affordability checks for customers.

 

RewardRate product set

 

Amigo proposes to come to market with two new loan products - a personal loan
and a guarantor loan. The personal loan starts at 49.9% APR while the
guarantor product begins at 39.9% APR, with both products offering the
borrower the opportunity to reduce the interest rate charged over time to
equivalent 34.9% APR by making payments on time. Customers can also freeze a
payment once a year, with no penalties.

 

All products will be marketed under the RewardRate brand, with no new lending
to take place under the Amigo brand. The name Amigo will continue to be part
of the regulated lending entity, Amigo Loans Ltd, as well as the listed
holding company Amigo Holdings PLC.

 

Pre-March 2020 loan products will not be sold again, with the legacy book
continuing to run off. A comparison of the old and new lending products is
provided in the table below.

 

                                      Amigo Loans 1.0                                                         New RewardRate Guarantor Loan                                New RewardRate Personal Loan
 Loan amount & terms                  £2,000 - £10,000 over 1 - 5 years                                       £2,000 - £5,000 over 2 - 4 years
 Equivalent APR                       49.9%                                                                   Starting rate of 39.9%, with the ability to reduce to 34.9%  Starting rate of 49.9%, with the ability to reduce to 34.9%
 Age                                  18-75                                                                   Age for borrowers: 21-65                                     Age for borrowers: 21-65

                                                                                                              Age for Guarantors: 28-65
 Affordability                        Minimum income of £800. Verified via document proof such as payslips.   Minimum monthly net income of £1,000 (where income is received from
                                                                                                              employment, the customer must have been employed for a minimum of 6 months).
                                                                                                              All income verified by Open Banking, or equivalent, with payslips requested
                                                                                                              where there is ambiguity.
 New feature: Annual Payment Holiday

                                                                                                              Customers can press pause on a payment once a year, with no penalties.
 New feature: Ratedropper                                                                                     Customers are rewarded with interest rate reductions for paying on time. This
                                                                                                              will result in cheaper monthly repayments.

 

An underserved market

 

There are an estimated 12 million adults in the UK who cannot obtain a loan
from a mainstream lender - people who are either credit impaired, or who have
low credit status or no credit history.

 

Under the current management team, which has been working since September 2020
to fix the problems of the past, Amigo has a stated purpose to provide those
with few options to borrow the opportunity to achieve financial mobility.
Today, people face credit exclusion on an unparalleled scale in UK credit
markets following the departure of specialist lenders from the sector, at a
time when changing economic fundamentals, including the growth of the
gig-economy and the aftermath of Covid, have led to rising demand. The result
has been, as the England Illegal Money Lending Team warned recently, that
"opportunistic illegal lenders are filling the void."

 

Amigo intends to play a significant role in supporting higher levels of
financial inclusion in society. There are challenges for new firms seeking to
serve this market in the form of high barriers to entry - set up costs such as
technology infrastructure, compliance and distribution are high. Amigo has
over 15 years' experience in the guarantor loans market and an established
infrastructure, including data analytics and distribution. We have learnt from
the mistakes of the past and intend to put our infrastructure and
institutional knowledge of the specialist lending market to good use - so that
people with few options have the opportunity to achieve financial mobility.

 

Returning to lending

 

Amigo suspended lending in March 2020 and subsequently agreed with the FCA not
to lend again without regulatory approval. The FCA outlined its position in a
letter dated 4 March 2022, stating that Amigo could return to lending subject
to the following conditions being met:

 

i.              the New Business Scheme being sanctioned by the
court (which occurred on 26 May 2022);

ii.             the FCA being satisfied that the Firm meets
certain threshold conditions set by the FCA;

iii.            outcomes testing of the Firm's new lending system
being completed to the satisfaction of the FCA; and

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

 

With the sanction of the New Business Scheme, Amigo has met the FCA's first
condition and continues to engage constructively with the FCA to satisfy it on
the other steps.

 

As part of the New Business Scheme, Amigo has agreed a £35m cap on net new
business lending before the proposed capital raise is completed. The £35m of
planned new lending is being funded by internal resources.

 

Commenting, Chief Executive Gary Jennison said:

 

"RewardRate has been designed to support financial mobility for the millions
of people in our society who have too few borrowing options. It has been
created by a new team, in collaboration with external partners, with the
objective of incentivising and rewarding on time payment and thus moving
people towards a better credit rating and onto mainstream banking. RewardRate
is backed by a company that has undergone profound cultural change under new
management and, once we have FCA approval, we believe it will be an important
new addition to the mid-cost market."

 

 

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.

 

Enquiries

Lansons

Tom Baldock - 07860 101715

Ed Hooper - 07783 387713

 

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