Sub-prime lender Amigo saw its stock crash further today after the company warned investors face being heavily diluted by last ditch rescue plans.
Amigo said it was working on new compensation plans for customers who were missold its guarantor loans. Previous plan were rejected by both the regulator and the High Court on the grounds that payouts were too low.
The new redress scheme will still only offer partial payment but will be more generous.
CEO Gary Jennison said: “Clearly, it has taken much longer than we had hoped but it is critical that we get this right to achieve the fairest outcome for all creditors by ensuring we have listened carefully to their views and fully addressed the concerns raised by the High Court and the regulator last May.”
Amigo will ask investors for more cash to fund the new plan and warned that this could lead to “material dilution” for shareholders, leaving them “owning a much smaller proportion of the group if they do not take up their rights.”
Failure to support the plans could force Amigo to “file for administration or other insolvency process.”
Jennison said: “The likelihood of a potential material dilution for shareholders is a difficult but necessary consequence of our situation. We have noted on many occasions, we are an insolvent business so there are no easy paths if we want to avoid administration and the only other options are for a managed wind-down or insolvency, both of which are worse outcomes for shareholders and customers.”
Shares in the already embattled lender crashed 3p, or 28%, to 7.6p. The stock was trading as high as 297p in December 2018.
The update on rescue plans came alongside half-year results. Revenue shrunk by 39% to £56.5 million in the six months to the end of September and customer numbers dropped by 42% to 102,000. However, the company returned to profit as the level of new compensation claims eased. The company made a pre-tax profit of £2.1 million.