January 27, 2020 / 7:32 AM / a month ago

Founder of UK subprime lender Amigo puts company up for sale

LONDON (Reuters) - Amigo (AMGO.L) founder James Benamor has put the British subprime lender up for sale, as he wants to find a new owner for his 60.6% stake, the company said on Monday.

Amigo lends to people with poor credit ratings provided they have someone who can guarantee the loan and step in for them if they can’t keep up repayments.

The business is being challenged by a regulatory crackdown after the UK’s Financial Conduct Authority issued warnings last year on the guarantor-lending industry, saying guarantors do not always understand the risk they are taking on.

Amigo said RBC Capital Markets is leading a strategy review which may result in the sale of all or parts of the 15-year old business.

Shares in Amigo plunged 43% to stand at 38.75 pence by 0844 GMT, the lowest since the company’s 2018 market debut.

Benamor, who founded the firm in 2005 and ran it for a decade before appointing a new boss, controls Amigo through his holding vehicle Richmond Group which ranks as Amigo’s biggest investor with a 60.6% stake.

He made a boardroom comeback in December when he became a non-independent and non-executive director while the company’s chief executive and chairman abruptly announced plans to step down.

The moves came after Amigo said in August it needed to overhaul its business model amid warnings of slower annual growth in its loan book, pushing its shares to a then record low.

Amigo said on Monday it continued to face a challenging operating environment but its loan book growth and impairments for the nine-month period ending Dec. 31 remained within guidance.

It said it was confident in the “robustness of its approach to lending decisions” but expressed concern that regulatory pressure would rise further.

“We continually look to enhance our processes and are monitoring developments with a view to assessing the long-term impact on the company,” it said.

The Bournemouth-based group said it had yet to receive approaches from interested parties and listed a series of alternative options to an outright sale, including a reorganization of entities within the group, the sale of the UK business or just certain loan books and a de-listing of the company’s shares.

Reporting By Pamela Barbaglia; Editing by Jan Harvey and Kirsten Donovan

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