An Amigo Loans advert
(Picture: Amigo Loans)Amigo Loans’ shareholders face a massive dilution of their holding under the struggling lender’s latest proposed survival plan.
But they will be left with nothing if they don’t approve it, the company warned.
Amigo plans a rights issue which will mean issuing 19 new shares for every existing one.
That would leave existing shareholders with less than 5% of the share capital.
The news sent the share price crashing more than half to 2.40p in early trading. Four years ago they were trading at close to 300p.
Under the new proposals Amigo intends to raise £97million to repay victims of its irresponsible guarantor loans and a further £15 million to contribute to the scheme.
The scheme requires court approval and will then be put to shareholders if it is approved.
Its previous scheme to repay customers – which capped compensation at £35million - was rejected by the High Court.
The plan could have seen successful complainers be handed as little as 5% to 10% of their claim if successful.
The court demanded higher payments to customers and for shareholders to lose their stake in the company if customers were not able to be paid in full.
The lender’s drawn-out dispute is over its controversial guarantor loans which it was accused of offering with an interest rate customers would never have been able to pay back.
Amigo warned that if shareholders reject the proposals “the New Business Scheme will revert into a wind down under which the shareholders will receive nothing”.
Chief executive Gary Jennison said the new proposals “are necessary for Amigo to survive and avoid insolvency.”
“The Board is fully committed to providing the maximum amount of redress possible for qualifying creditors,” he added.
If the new plan is sanctioned, Amigo will have up to a year to complete the new equity raise.
