High-interest loans company Amigo is struggling to convince investors to help pay off what it owes to customers who were mis-sold loans they could not afford, the business revealed on Monday.
The lender said it has not managed to find a so-called “cornerstone” investor to help it raise £15 million for customers, blaming the “economic backdrop”.
Cornerstone investors are often larger players that promise in advance to buy into a company’s fundraising, which helps give confidence to other investors.
Amigo has been on the ropes for several years after receiving an onslaught of complaints over how it sold loans to customers.
The lender offered cash to people who could not get money from regular lenders, but only if they could provide a friend or a family member as a guarantor.
In an example on its website, Amigo said it would charge an annual interest rate of just under 50%, meaning a customer paying back a £4,000 loan over five years will end up owing nearly £9,500. Amigo said that this is its old product, and its new loans are given at lower rates.
Last May, the High Court approved a deal between Amigo and its customers which would see the borrowers get at least some of the money they were owed by the lender.
This plan was conditional on Amigo raising money from shareholders, of which at least £15 million would go to its customers to make up for bad behaviour.
Amigo said it has received some interest from inventors, but no cornerstone investor.
As a result, it is trying to figure out if there is enough interest so that a syndicate of different investors could together hand it £45 million.
If this money cannot be found, the fallback solution is “an orderly wind-down of the business”, Amigo said.
This would mean less money for wronged customers, it added.
“It is disappointing that we have so far been unable to identify the requisite equity backers for the business,” said chief executive Danny Malone.
“However, we are continuing with our efforts to put together an equity investor consortium as expeditiously as possible.
“We realise that the economic backdrop since we announced the scheme has changed substantially.
“This has made the process of raising equity capital to support the scheme conditions significantly more challenging than expected.”