Speculative situation
feb' 2021

'amigo holdings'

We have now acquired a position of £3500 in this situation and so as there is no "turning back" I would like to share with you the company (Amigo Holdings) and the reasons for the investment.

As mentioned, Amigo Holdings was a company I came across that would have usually fitted into a typical valuable opportunity. It ticked all my usual boxes from a fundamental perspective and as a Credit/Loan Service provider it sits in a strong Industry, now even more so with the current economic climate and the expected increase of easy money requirements from many sections of the population.

Amigo, although I have never used it's services before, has a strong Brand and facilitates loans that are competitive to all it's industry Peers in the Credit Provider industry.


Upon further research and tracking it's share price movement, I discovered it wasn't ridiculously undervalued without reason and noticed what was brewing.

The following I have tried to explain as simply as I can.



During 2020 Amigo experienced a substantial increase of complaints that were predominantly sourced from Claims Management Companies (CMCs). Although these complaints were largely inline with expectations up until H1 and able to be met with the company's provision allocations of £116m, the volume continued to increase further and began being referred to the Financial Ombudsman Service (FOS). Due to these complaints being administered via the FOS, the Financial Conduct Authority was obligated to get involved.

Whilst Amigo agreed to work with the FCA in order to meet its customer complaints settlements within an allocated time frame, complaints still flooded in and so Amigo, struggling to deal with all of them, whilst also trying to cater to an influx of new customers due to COVID, took the decision to pause it's lending towards the end of 2020 and also disclosed that it's provision of £116m has been increased to £160m to deal with customer compensation.

Running parallel to this, the FCA reported that it was going to be undertaking a review of unsecured credit market regulation, the Woolard Review, which will look at how regulation can better support a healthy unsecured lending market. With the avalanche of complaints Amigo was facing, it's operation was expected to be in the firing line.

The FCA and FOS continued to ramp up it's pressure on Amigo.

The flurry of negativity surrounding the company has, as expected, destroyed the value of its shares and drove away practically all institutional investors causing a severe knock on effect.

Amigo however was still keen to deal with the complaints and work with the FCA, but has come up with what has been regarded as a controversial proposal that will enable them to do so.



In December last year, Amigo proposed the use of a Scheme of Arrangement. Under the Scheme, Amigo will enable valid customer claimants to receive redress payments and the FOS in respect to any case fees incurred.

The reason the scheme is controversial is because it limits the amount of compensation it will potentially pay to its customers.

The Scheme is still undergoing assessment from the FCA and the decision will not be made until March. Amigo also announced that if the Scheme is rejected it will face insolvency and therefore the future of the company and our investment is dependent on the outcome of the FCA decision. 

The first Court hearing asking the Court to convene a meeting of ALL Scheme Ltd’s (the company proposing the Scheme) creditors is scheduled for 30 March 2021. If the Court calls a meeting of creditors, customers who think they have a valid claim (and the FOS) would then be asked to vote on the Scheme, expected late April. If the Scheme is approved by the creditors, a second Court hearing to approve the Scheme would be held on 10 May. The Scheme effective date is expected to be in mid-May 2021 following which customers will have six months to submit a claim. The first payments to valid claimants would likely be made in early / mid 2022.



Although the future of the company literally hinges on the decision of the Scheme, there are a number of elements to the situation that have still made Amigo attractive to me and I why I feel the Scheme is likely to be accepted.


Fundamentally, Amigo is still a good business and is liquid enough to provide the redress payments under the Scheme, although it took a hit last year and the expected payments increased to £160m from £116m its cash position is still positive. It has a revolving credit facility with the bank which it did not use.


The onslaught of complaints have been administered by Claims Management Companies, I believe once the dust settles it is likely that a lot of the complaints will not be genuine. CMCs do not operate with any integrity and usually hire desperate people who are incentivised only through harsh bonus targets and so are forced to add as many claims as they can to their scratch cards which are usually false.

Also, since CMCs have had PPI claims pulled from them they have been desperate to recoup this lost cash cow and have preyed on other segments of the financial world. If the Scheme goes ahead and with the FCA Co-operation, Amigo will be able to present legitimate claims and I am sure it will be a lot lower than the current expectation. This in itself is a valuable outcome.


The Woolard Review, which was published this morning (although I don't know how it took 4 months to write), took an unexpected positive turn and instead announced that the Buy Now Pay Later firms are the ones facing new scrutiny and regulation. Whilst this was not likely to produce any immediate positivity for Amigo, the fact that it and the industry as a whole was unscathed meant no new negative sentiment.

However, the BNPL industry handles about $10.5 billion worth of transactions I think at the moment, the biggest being Klarna. Having this new, much more lucrative target on the FCAs hitlist in my opinion is likely to reduce it's pressure on Amigo, so I see it as a step in the right direction.


Amigo's strategy in handling this has been smart. It has done everything by the book, co-operated with all parties and is willing to pay back genuine cases. However, it's master stroke has been the announcement of insolvency should the Scheme not go ahead. Not only does this mean that claimants are extremely unlikely to receive any compensation if the company fails, but it also means there will be another 500 odd people unemployed, which could have been avoided if the FCA agreed to the plan. Another positive from the Woolard Review is that it was noted there are minimal Mid-tier Credit Providers, which is where Amigo sits.


There was a lot of drama at the Amigo board last year and the company is now made up of an entirely new collection of executives. A new board who are keen to turn things around is always favorable in these situations, but for me the real advantage is the new chief executive Gary Jennison. He has been in the industry for over 15 years and has a solid record for turning around companies under regulatory pressure.

This means Gary has no doubt got a very good relationship with the FCA, and ofcourse I don't know these people myself, but it is likely that knowing he is now in charge, they are likely to agree to his proposal, knowing he has turned around situations previously in a honest and professional way.


These are the key reasons why I saw this as an opportunity for us. The current share price is at the point where it is going to go to £0 by the end of the year or present a fantastic value position for us. Although it is very unlikely that the business will reach my valuation of £1.40 a share within the next 3 years. If the Scheme goes as planned and Amigo can continue it's lending then there is room for moderate scalability on this investment. However it will be a rough road. (This is the last time I'll say this): IF THE SCHEME GOES AHEAD.


Any questions let me know, keen to get your thoughts.