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Funding crunch sends sub-prime lender Amigo's shares tumbling

By Carolyn Cohn and Iain Withers

LONDON (Reuters) - Shares in British subprime lender Amigo tumbled 39% on Monday after the company said it had failed so far to find a cornerstone investor for a planned capital raise, putting the future of the company in doubt.

Amigo has been scrambling for survival after a deluge of customer complaints of mis-selling loans.

It received approval from Britain's financial regulator in October 2022 to return to lending under certain conditions, two years after it ceased lending.

The company won court approval in May 2022 for a compensation scheme for past customers and a rescue plan for the business conditional on raising fresh capital.

Amigo said it had not been able to find a cornerstone investor to date, and was now looking for a syndicate of investors to pull together 45 million pounds ($55 million).

The company also said it would extend pilot testing of its new lending products while its funding was resolved, adding that volumes were low as it took a cautious approach to lending in tough economic conditions.

Amigo shares fell as much as 39% in early trading on Monday and were last down 21% at 3.1 pence.

"It is disappointing that we have so far been unable to identify the requisite equity backers for the business," said CEO Danny Malone, pointing to tough market conditions.

"We are continuing with our efforts to put together an equity investor consortium."

If Amigo fails to complete the planned capital raise by May 26 this year, the "fallback solution" under its rescue plan would be an orderly wind-down of the company, it said.

Former Amigo customers owed compensation would then miss out on a minimum 15 million pounds contribution from investors to their redress, Amigo said, adding that this pot was still likely to be at least 97 million pounds.

Amigo's share price has collapsed 99% from a high of 315 pence shortly after a 2018 IPO valuing it at 1.3 billion pounds.

The company's market value was just 18.5 million pounds before market open on Monday, according to Refinitiv Eikon data.

($1 = 0.8179 pounds)

(Reporting by Carolyn Cohn and Iain Withers; editing by Jan Harvey and Emelia Sithole-Matarise)