Amigo Loans on the auction block after looming exit of top shareholder

Sub-prime lender Amigo put itself up for sale on Monday after its top shareholder threw in the towel and said it wanted out of the ailing company.

The small cap firm, which lends to people with a poor credit history, has lost around £1 billion of value since it floated in June 2018 because of a regulatory crackdown on sub-prime lending.

Amigo was founded by James Benamor whose Richmond Group, Amigo’s controlling shareholder, unveiled plans to offload the 61% stake it holds in the firm.

That prompted Amigo to launch a strategic review led by RBC Capital, a move that will see the company sold to another sub-prime lender or a private equity buyer.

A sale of parts of the group or auction for individual loan books is also on the cards.

Amigo floated on the London stock market for a whopping £1.3 billion but is now valued at just £323 million. Shares crashed 25%, losing 17p to 51p. They floated at nearly £3.

The company came under fire for its guarantor loan model, which lends to people if they can convince a family member or friend to pay for them if they cannot pay back a loan.

A spike in complaints to the Financial Ombudsman Service and a tougher approach from the regulator — the FOS upholds four in five complaints — stoked concerns Amigo may have to book impairments.

Today it warned there would be trouble ahead.

“We are concerned that there may be increased pressure on our business and a continual evolution in the approach of the Financial Ombudsman Service,” it said. “We continually look to enhance our processes and are monitoring developments with a view to assessing the long-term impact on the company.”