UK subprime lender Amigo plans move into music streaming

Unlock the Editor’s Digest for free

Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

Amigo Holdings, the ailing UK subprime lender currently winding down its business, is in talks over a move into the music and film streaming market in a bid to generate “some small value” for shareholders.

The company said on Tuesday that it had entered exclusive discussions with a group led by Craven House Capital to buy Norway-based music streaming service ONE Bas.com, Swedish film streaming service TV Zinos, payments provider Payzinos and another company, in exchange for newly issued Amigo shares.

Amigo’s shares have been suspended from trading pending more news on the deals. The company said that if the transactions went through, existing shareholders would be “significantly diluted”. The deals could result in a cash subscription of at least £5mn for newly issued shares, it added.

The agreement to enter exclusive talks until December 14 comes after an “extensive search” for financing for Amigo’s lending business, a task that the company concluded was “effectively not possible”.

If completed, the deals would deliver “some small value to shareholders which wouldn’t be possible otherwise”, said chief executive Danny Malone.

“We have remained open to investment opportunities that would allow the business to restart, but have always said the likelihood of success to be very low,” he said. “Unfortunately that has been the case”.

The lender in March said it would halt all lending and wind down its business after several efforts to restructure it and its failure to raise a crucial £45mn from investors. The UK’s financial watchdog in February censured Amigo for failing to properly assess whether borrowers could afford its loans but spared it a £72.9mn fine to avoid “serious financial hardship”.

Amigo’s collapse as a lender came amid wider turmoil in the subprime lending market, which provides loans to borrowers who are unable to borrow from traditional lenders due to their credit histories. The sector took off in the wake of the great financial crisis before coming under regulatory scrutiny over the affordability of its loans.

A regulatory crackdown claimed some of the sector’s biggest names, including payday lender Wonga, which collapsed in 2018 following a flurry of claims from former customers.

Liam Evans, director at Alvarez & Marsal, said the move into streaming was part of a wider diversification trend within financial services companies.

“In this space of high-cost loans it’s very difficult to generate capital . . . what this is going to do for Amigo is generate access to customers that it can then revert back into loans in the medium term” said Evans, adding this would allow the lender to avoid going through brokers to acquire customers.

Malone, who resigned from the top job in May, would continue to lead Amigo past his notice period until the end of the year in an effort to help with the negotiations, the company said. Amigo would continue to wind down its lending business as planned, it added.

Shares in Amigo have plummeted since its £1.3bn listing in 2018 with the group now trading with a market value of £1.8mn.