Amigo Holdings PLC (LSE:AMGO) has failed to secure a cornerstone investor for its planned fundraising exercise, casting doubt on the future of the sub-prime lender.
The Bournemouth-based company was thrown into disarray in 2019 when the government enacted a crackdown on unaffordable lending practices, which opened the floodgates to a deluge of mis-selling complaints against doorstep and payday lenders.
Amigo's shares collapsed by over 90% between May 2019 and May 2020.
The High Court initially sanctioned Amigo’s scheme of arrangement in May 2022, opening the way for Amigo to pay compensation to customers with a valid claim of redress for loans which were mis-sold prior to the company suspending all lending in November 2020.
Under the agreement, Amigo would contribute a minimum £15mln out of the fundraising exercise to creditors, with the remainder going towards plans to grow the company’s pilot lending programme.
In lieu of finding a cornerstone investor to commit to the capital raise, Amigo is now assessing whether a syndicate of minority investors can be formed.
Failure to secure enough backers to satisfy a £45mln capital raise by May 26, 2023, will trigger an orderly wind-down of the business, thereof resulting in £15mln less going towards creditors.
In a statement, Amigo chief executive Danny Malone commented: "It is disappointing that we have so far been unable to identify the requisite equity backers for the business. However, we are continuing with our efforts to put together an equity investor consortium as expeditiously as possible."
“We realise that the economic backdrop since we announced the scheme has changed substantially. This has made the process of raising equity capital to support the Scheme conditions significantly more challenging than expected," he added.
Amigo shares tumbled by more than 25% to 2.88p on Monday as a result, bringing the group’s market capitalisation below £14mln.