UK venture lender Amigo warns of operations as it collapses

Amigo Loans warned on Monday that there was “significant uncertainty” about its ability to continue operating as the UK sub-prime lender grapples with increased customer complaints, a regulatory investigation and the coronavirus crisis .

The company said it was confident it had “adequate liquidity,” but warned that additional funding would be needed if customer complaints were higher than expected for an extended period, or if the Financial Conduct Authority was forcing the group to do a major remedial exercise.

This set of circumstances “represents a significant uncertainty which may cast significant doubt on the ability of the group and the company to continue in business,” said the lender.

Amigo, which has been in turmoil since its listing on the London Stock Exchange in 2018, provides collateral loans, a type of loan to people with poor credit histories who have a friend or family member who will intervene in the event of a fault.

British regulators are investigating how they assessed clients’ creditworthiness after Amigo founder and majority owner James Benamor accused him of knowingly giving irresponsible loans. Amigo denied the charges.

In a statement issued on Monday, Amigo said there were “a number of potential outcomes” from the investigation, including a “significant fine” or mandatory backlog remediation exercise that “should reasonably be used to exhaust them. available liquid resources of the group “. The group added that such an exercise was “a possible outcome, but not the most likely outcome.”

A mandatory remediation exercise would force Amigo to review its historic loans and potentially indemnify customers.

Amigo shares fell 20% in morning trading on Monday.

The warnings came as Amigo released its long-delayed results for the 12 months ending March 31, when the company collapsed at a loss of £ 27million. This compares to a profit of £ 89million the year before.

The drop was caused in large part by a provision of £ 127million to deal with an increase in customer complaints. Loan write-downs as a percentage of income also fell from 24% to 39% due to the disruption caused by the coronavirus pandemic.

The company’s handling of complaints is at the heart of the recent dispute between Amigo and Mr. Benamor, who founded the group in 2005. Mr. Benamor failed to remove the entire board of the company, but the dispute nevertheless led to the departure of its chairman and managing director.

On Monday, Amigo announced the appointment of Jonathan Roe as the new president. Mr Roe, a former investment banker and chairman of one of Amigo’s rivals, will join the board next month.

Mr. Roe said, “I join a team where everyone shares a common belief in Amigo’s business and product, as well as in its ability to meet the needs of its current and future customers. “

Earlier this month, Amigo re-elected former chief Glen Crawford as chief executive, a move which has been welcomed by Mr Benamor.

Roger Lovering, Acting President, said: “The past 12 months have been a tough and difficult time. . . with the General Assembly now behind us and Glen Crawford re-elected as CEO, Amigo will move forward with greater clarity and a determination to resolve the challenges we face.

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