Amigo - comment

Amigo’s Q3 numbers were just window dressing around the real battle, getting approval from stakeholders and the courts for the scheme of arrangement, and the FCA’s approval for the launch of Amigo 2.0. Amigo is meeting the FCA tomorrow and is expecting to know the regulator's position on Amigo 2.0 before the High Court convening meeting on 8th March (the sanctioning hearing is scheduled for 23/24 May). If the FCA was to refuse a return to lending, then Amigo Loans will go through an administration process. If the return to lending is refused, Amigo management is now planning a return to lending with a new and separate company with the same business plan as Amigo 2.0. This may well help focus the FCA’s mind, sanctioning Amigo 2.0 could achieve the same result for new borrowers whilst increasing the recovery for customer complainants.
- In the third quarter the loan book fell from £230m to £180m, in the LTM period it is down 56.2%. Arrears are rising and the impairment coverage ratio has risen from 18% to 22.4% year on year. As the book runs off the proportion of delinquent loans will rise, the highest quality loans have either repaid or been refinanced. Increasingly what is left is those who cannot or will not pay.

- Our 7% of NAV long position was reduced by the redemption of £184.1m of the £234.1m bonds outstanding. We expect the scheme of arrangement to be approved and remain long in the expectation that the FCA supports Amigo 2.0 and that bondholders get the opportunity to participate in the equity raise.