TIDMAMGO
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 New RewardRate Personal
Loan Loan
Loan amount GBP2,000 - GBP10,000 GBP2,000 - GBP5,000 over 2 - 4 years
& terms over 1 - 5 years
--------------------- ---------------------------------------------------
Equivalent 49.9% Starting rate of 39.9%, Starting rate of 49.9%,
APR with the ability to with the ability to
reduce to 34.9% reduce to 34.9%
--------------------- ------------------------- ------------------------
Age 18-75 Age for borrowers: 21-65 Age for borrowers:
Age for Guarantors: 21-65
28-65
--------------------- ------------------------- ------------------------
Affordability Minimum income Minimum monthly net income of GBP1,000 (where
of GBP800. Verified income is received from employment, the
via document proof customer must have been employed for a minimum
such as payslips. of 6 months). All income verified by Open
Banking, or equivalent, with payslips requested
where there is ambiguity.
--------------------- ---------------------------------------------------
New feature:
Annual Payment Customers can press pause on a payment once
Holiday a year, with no penalties.
--------------------- ---------------------------------------------------
New feature: Customers are rewarded with interest rate
Ratedropper 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 GBP35m
cap on net new business lending before the proposed capital raise
is completed. The GBP35m 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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END
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