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Amigo Loans share price plummets after court ruling

Amigo described the compensation package as essential to its survival

Amigo Loans, one of the UK’s major subprime lenders, could struggle to survive much longer after a high court judge refused to approve a compensation scheme on Tuesday.

The company described the compensation package as essential to its survival.

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Amigo was attempting to minimise its liabilities for backdated customer complaints through the arrangement.

Amigo shares dived by 53%, down to 8.76p at the time of writing, following the judge, Mr Justice Miles’s ruling that the court would not sanction the scheme.

While the company had previously secured a majority of 95% of votes supporting the scheme from customers at a meeting earlier in May, Miles pointed out that the turnout was a mere 8.7%.

“I understand why the directors have sought to find a way of addressing the potentially unsustainable level of redress claims,” Miles said.

Miles added: “Some form of restructuring of the group is clearly desirable and indeed needed. But the question is whether, in all the circumstances, this scheme should be approved. I have accepted the submissions of the Financial Conduct Authority that the redress creditors lacked the necessary information or experience to enable them properly to appreciate the alternative options reasonably available to them; or to understand the basis on which they were being asked by Amigo to sacrifice the great bulk of their redress claims, while the Amigo shareholders were to be allowed to retain their stake.”

Having previously said that the company’s shares would become worthless without the scheme, chief executive of Amigo Gary Jennison said: “We are currently reviewing all our options and will provide an update at the earliest opportunity.”

Amigo grew in the aftermath of the 2008 financial crisis, reaching a valuation of £1.4bn as it was listed 10 years later.

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