Amigo Holdings PLC (lon:amgo)
Amigo – Is It About To Double, 10p To 20p?

Amigo Holdings PLC Share Price
Grade:The Pink Grade - A Pure Slightly Informed Gamble, The Market Doesn't Like The Company But I Think That I Understand Why.
Title: Amigo – Is It About To Double, 10p To 20p?
Company: AMGO - Amigo Holdings PLC
Share Price Then: 0p
Author: Ian Smith
Date: Wed 19 Aug 2020
Comments: Richmond Group are now down to 16% so in another 3 weeks they will have sold all of their holdings.

Another extension of the securitisation facility performance trigger waiver had been granted until 18th December

The groups funding comes from two sources, a third source an RCF has been cancelled as it is no longer needed as no new loans are being made.
Senior secured notes due 2024 – £234m
Securitisation due 2022-2026- £300m (reduced to £250m)

The Securitisation funding is primarily a legal manoeuvre, AMGO Funding (No. 1) Ltd, is a special purpose entity created for the purpose of funding the lending but its liabilities and assets are ultimately owned by Amigo.

New drawings were to stop in 2022 and it was to be repaid by 2026. A waiver on the terms of this funding has been agreed until December 2020, this means that no new funds can be drawn but also that the performance clause which COVID could well trigger will not be applied.
However this waiver also requires that this facility must be restructured.

Early Amortisation is the penalty for not being able to restructure the facility this mean no new funds from the facility and the balance to be repaid starting then not 2022.

The terms of this performance trigger isn’t easy to find nor exactly what the terms of Early Amortisation are.

Amigo have used £199m of the £250m facility and it appears that all repayments from loans made using this loan facility are being used to reduce this balance.

The company is still not lending but the last report said 220,000 borrowers and < 10% of repayments made by guarantors. So we can’t forget those who are repaying their loans, a loan book of £643m and almost £300m of repayments.

Surely we must be close to the point where COVID can no longer be the reason for not lending, is everybody just killing time until some better understanding of the FCA view on the sufficiency of Amigo’s credit check is known.

Q1 results are due soon and they will clearly show no new lending and some reduction in the value of the loan book but if you look at some of the costs for 2019-2020 and consider them for the first half of 2020-2021
Advertising and marketing £14.5m
Employee costs £18.0m
Print, post and stationary £3.5m
Credit scoring costs £3.2m

Advertising and credit check should surely drop to close to zero, print and post down as no new applications are being sent, but the employees cost is unclear. There may have been some Job Retention revenue and as there are no new applications to process a drop possibly offset by an increase for more staff to cover complaints.

So who has been buying all these shares Richmond have been selling,
Hargreaves Lansdown Stockbrokers Ltd (10.8%) and Glen Crawford (6%) seem to be some of them.

So we are still in the position of is the company winding down, collecting repayments and repaying its debt or is it about to emerge with a vengeance after the credit check investigation?
COVID is clearly a worry as we are yet to see the real level of redundancies and a lot will depend on how strong the guarantors’ are.

Yet the company has £145m of cash and at 10p per share the market cap is around £50m and up until a couple of years ago a very good business model.

A model that is surely going to be in even more demand over the next year.
Read Count/ID: 109/13170

Buy/No Buy In A Nutshell
NegativesA combination of making risky loans and an unwillingness to tell complainants and regulators that the borrower and guarantor has the majority of the responsibility as they asked for and accepted the loan
PositivesNew management could get much more aggressive with people complaining that they asked for and were given loans but they can't afford them.
Initial Review Price7p
Last Review Price17.8p
Last Review Date21-Aug-2020
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