28 June 2022

Amigo Holdings PLC

("Amigo" or the "Company")

Update on New Business Scheme - Amigo plans new lending proposition under different brand

Following the sanctioning of the New Business Scheme of Arrangement by the High Court in May, Amigo Holdings PLC (LSE: AMGO) ("Amigo or the Company") today announces initial details of a new lending proposition, which the Company intends to bring to market, subject to Amigo receiving consent from the FCA to return to lending.

Throughout the year, the Board has pursued a Scheme of Arrangement ("Scheme") to deliver the best possible outcome to redress creditors as it seeks to address Amigo's historic lending complaints liability. The Scheme was sanctioned by the High Court in May 2022 and the preferred solution is contingent on lending restarting by 26 February 2023 and Amigo completing a successful equity raise by 26 May 2023.

The new proposition will trade under a new brand, RewardRate. It aims to offer more affordable, responsible and flexible finance for underserved consumers who currently have few borrowing options. RewardRate also seeks to provide a pathway out of higher cost finance to cheaper credit by enabling those who make their loan payments on time to reduce their APR by up to 15 percentage points. In shaping the proposition, Amigo's new management team has taken learnings from Amigo's past to ensure a customer-centric compliant and responsible culture is at the core of the business as well as an improved underwriting process with enhanced affordability checks for customers. 

RewardRate product set

Amigo proposes to come to market with two new loan products - a personal loan and a guarantor loan. The personal loan starts at 49.9% APR while the guarantor product begins at 39.9% APR, with both products offering the borrower the opportunity to reduce the interest rate charged over time to equivalent 34.9% APR by making payments on time. Customers can also freeze a payment once a year, with no penalties.

All products will be marketed under the RewardRate brand, with no new lending to take place under the Amigo brand. The name Amigo will continue to be part of the regulated lending entity, Amigo Loans Ltd, as well as the listed holding company Amigo Holdings PLC.    

Pre-March 2020 loan products will not be sold again, with the legacy book continuing to run off. A comparison of the old and new lending products is provided in the table below.

An underserved market

There are an estimated 12 million adults in the UK who cannot obtain a loan from a mainstream lender - people who are either credit impaired, or who have low credit status or no credit history.

Under the current management team, which has been working since September 2020 to fix the problems of the past, Amigo has a stated purpose to provide those with few options to borrow the opportunity to achieve financial mobility. Today, people face credit exclusion on an unparalleled scale in UK credit markets following the departure of specialist lenders from the sector, at a time when changing economic fundamentals, including the growth of the gig-economy and the aftermath of Covid, have led to rising demand. The result has been, as the England Illegal Money Lending Team warned recently, that "opportunistic illegal lenders are filling the void."

Amigo intends to play a significant role in supporting higher levels of financial inclusion in society. There are challenges for new firms seeking to serve this market in the form of high barriers to entry - set up costs such as technology infrastructure, compliance and distribution are high. Amigo has over 15 years' experience in the guarantor loans market and an established infrastructure, including data analytics and distribution. We have learnt from the mistakes of the past and intend to put our infrastructure and institutional knowledge of the specialist lending market to good use - so that people with few options have the opportunity to achieve financial mobility. 

Returning to lending

Amigo suspended lending in March 2020 and subsequently agreed with the FCA not to lend again without regulatory approval. The FCA outlined its position in a letter dated 4 March 2022, stating that Amigo could return to lending subject to the following conditions being met:

i.              the New Business Scheme being sanctioned by the court (which occurred on 26 May 2022);

ii.             the FCA being satisfied that the Firm meets certain threshold conditions set by the FCA;

iii.            outcomes testing of the Firm's new lending system being completed to the satisfaction of the FCA; and

iv.           dealing with, to the FCA's satisfaction, any other issues that may arise.

With the sanction of the New Business Scheme, Amigo has met the FCA's first condition and continues to engage constructively with the FCA to satisfy it on the other steps.

As part of the New Business Scheme, Amigo has agreed a £35m cap on net new business lending before the proposed capital raise is completed. The £35m of planned new lending is being funded by internal resources.

Commenting, Chief Executive Gary Jennison said:

"RewardRate has been designed to support financial mobility for the millions of people in our society who have too few borrowing options. It has been created by a new team, in collaboration with external partners, with the objective of incentivising and rewarding on time payment and thus moving people towards a better credit rating and onto mainstream banking. RewardRate is backed by a company that has undergone profound cultural change under new management and, once we have FCA approval, we believe it will be an important new addition to the mid-cost market."  

Additional Information

This announcement is not intended to, and does not, constitute or form part of any offer, invitation, or the solicitation of an offer to purchase, otherwise acquire, subscribe for, sell, or otherwise dispose of, any securities, or the solicitation of any vote or approval in any jurisdiction, pursuant to this announcement or otherwise.

This announcement constitutes notice by Amigo Luxembourg S.A. (the "Issuer") to the holders of the Issuer's 7.625% Senior Secured Notes due 2024 (for the notes issued pursuant to Rule 144A of the United States Securities Act of 1933, ISIN: XS1533928468 and Common Code: 153392846; for the notes issued pursuant to Regulation S of the United States Securities Act of 1933, ISIN: XS1533928625 and Common Code: 153392862) (the "Notes") issued pursuant to pursuant to Section 4.03(a)(3) of an indenture dated January 20, 2017 among, inter alia, the Issuer, the guarantors named therein and U.S. Bank Trustees Limited, as trustee and security agent.  Amigo Holdings PLC is the indirect parent company of the Issuer. This announcement shall constitute a "Report" to holders of the Notes.

Enquiries

Lansons

Tom Baldock - 07860 101715

Ed Hooper - 07783 387713