Amigo scheme of arrangement thrown out by High Court

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Amigo Holdings PLC (LON:AMGO) shed half of its value as a high court judge blocked its controversial scheme of arrangement even though creditors had voted in favour.

The scheme, which was designed to cap compensation payments for cases of mis-selling of guaranteed loans by Amigo, had faced opposition from the FCA, the UK’s financial watchdog.

The UK regulator said today it is now carefully considering the court ruling and also how Amigo responds.

 “The FCA has, 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,” it said in a statement.

“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.”

In his judgement, Mr Justice Wills concurred with the FCA adding that Amigo’s proposals would “probably not lead to the imminent insolvency of the group”.

Creditors who supported the scheme “lacked the necessary information or experience” to assess the alternatives, he said.

The judge added that he was “not persuaded” that he could “properly place any reliance” on the vote backing Amigo’s proposals as it amounted to less than 9% of the scheme’s creditors.

He added that the impression was that failure to accept the proposal would make administration the “automatic and immediate consequence, a view he did not share.

“Creditors could therefore decide to accept something or nothing,” he said.

Gary Jennison, Amigo’s chief executive, said the company was ‘incredibly disappointed’ that the Scheme has not been approved and pointed out that 95% of customers who voted supported the scheme.

“We are currently reviewing all our options and will provide an update at the earliest opportunity,” he added, which might include an appeal.

The proposal would have seen a pot of between £15-35mln shared out by all the claimants plus a share of profits made by the company over the next four years.

This would limit payouts to around 10p in the pound 

Amigo had said previously the company might go bust if the scheme was not approved.

Shares in Amigo slumped 50% to 9.71p.

 

— adds judgement detail —

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