Shares slump as moneylender Amigo puts itself up for sale

Company has recently come under pressure from increasing regulatory scrutiny

Amigo Loans started lending in the Irish market early last year

Amigo Loans started lending in the Irish market early last year

 

Shares in Amigo fell more than 40 per cent on Monday morning after the subprime lender put itself up for sale in the wake of its founder retaking control and removing its chief executive and chairman.

Amigo said it would launch a “strategic review and formal sale process” at the urging of James Benamor’s Richmond Group investment vehicle, which controls 61 per cent of the company. It said it had not yet received any approaches and appointed RBC Capital Markets to advise it on the review.

Shares in the company were down 44 per cent in early trade in London.

Amigo said it would consider other options in addition to a full sale, including a sale of parts of the group – although the vast majority of its business is in the UK, where it only offers a single product.

The group is the UK’s main provider of guarantor loans, lending to borrowers with bad credit histories if they have a friend of family member who agrees to step in if they fail to repay.

Amigo expanded rapidly in the years leading to its initial public offering in 2018. It started lending in the Irish market early last year, targeting what it described as a “glaring need” with loans of up to €5,000 at an annual rate of 49.9 per cent.

Scrutiny

But it has recently come under pressure from increasing regulatory scrutiny.

Shares in the company dropped almost 80 per cent last year, after it appointed a new chief executive – Hamish Paton – who said he would overhaul its model in response to the regulatory threat. However, Mr Paton departed after Mr Benamor reasserted control of the business and returned to the board.

In a short update alongside Monday’s sale announcement, Amigo said its loanbook growth and impairments in the final three months of 2019 were in line with earlier guidance, but it struck a further note of caution about the potential impact of customer complaints.

The company said it “remains confident in the robustness of its approach to lending decisions”, but added “we are concerned that there may be increased pressure on our business and a continual evolution in the approach of the Financial Ombudsman Service”. – Copyright The Financial Times Limited 2020