Amigo Loans rescue plan rejected by High Court

Guarantor lender, Amigo’s plan to cap compensation payouts have been turned down by the High Court, which agreed with the Financial Conduct Authority that the proposal was unfair to the firm’s creditors.

Mr Justice Miles said borrowers had not been given the necessary information to understand “the basis on which they were being asked by Amigo to sacrifice the great bulk of their redress claims, while the Amigo shareholders were to be allowed to retain their stake.”

Gary Jennison, Chief Executive, said “We are currently reviewing all our options and will provide an update at the earliest opportunity.” A

The Financial Conduct Authority (FCA) had objected to the proposed Scheme and is now carefully considering the Court’s judgment and Amigo’s response.

The FCA says through its continued engagement with Amigo and participation in the Court hearing, sought to get a better, fairer deal for Amigo’s customers due redress. We believe that a fairer compromise could have been offered to customers, but was not.

The FCA considered it necessary in this case to share with the Court its view that the Scheme as proposed was inherently unfair, as it placed a disproportionate burden on customers, as opposed to shareholders and bondholders, to keep the company afloat.

The FCA believes that Amigo can propose a fairer Scheme to customers.   It should also ensure that its customers are fairly represented and advised on alternative proposals for a scheme.

FCA regulated firms must maintain adequate financial resources which includes taking account of the need to pay redress liabilities. We have significant concerns about Schemes of Arrangement being used by firms to unfairly avoid paying customers redress.

Firms should be regularly assessing the adequacy of their financial resources and report to us immediately if they assess they are or will be in financial difficulty. To understand our expectations for their assessments, firms should refer to the FCA Finalised Guidance on assessing adequate financial resources.

This is an important judgment and any firm considering a scheme of arrangement should take it into consideration.