The court sanctioned one of two potential schemes of arrangement for Amigo Loans Ltd (Amigo) and approved a plan that provided for two possible outcomes. 

Background 

Amigo provided guarantor loans to customers with poor credit scores. Amigo owed customers and the Financial Ombudsman Service £375 million for customer complaints and was insolvent.

Following a court order to convene creditor meetings and the two schemes being approved, the court considered whether to sanction the first scheme of arrangement. It was only to consider the second scheme in the event it did not sanction the first. The first scheme provided for two possible results:

• The FCA allowed Amigo to resume its lending activities.
• If the FCA refused, an equity raise would be made and the existing shareholding diluted.

Decision 

The court sanctioned the first scheme of arrangement and so did not need to consider the second.

The judge held that:

• Amigo had taken sufficient steps to ensure creditors understood what they were voting on. This included appointing an independent customer advocate who answered creditors' and a consumer body's questions; and by explaining the schemes in written communications using clear language.
• The court was sufficiently certain that the scheme would be effective. It was only uncertain about which version of the scheme would develop as this depended on the FCA's decision.

Key takeaways

The case demonstrates how flexible schemes of arrangements are. Creditors can be presented with two schemes which can themselves be versatile.

Find out more

To discuss the issues raised in this article in more detail, please contact a member of our Restructuring & Insolvency team.