THE company behind Amigo Loans has warned that insolvency is still an option after being given an extra three-month lifeline from its own lender.

The Bournemouth-based guarantor lender said that its bank had extended the grace period it had given Amigo to September 24.

The waiver had been due to run out today, Friday.

During this period, the bank will not take action if Amigo breaks the conditions attached to the so-called securitisation facility.

Amigo – which employs around 400 people – had previously said it was exploring all options including insolvency after losing a key High Court case.

It had sought approval for a scheme to cap compensation to customers who made complaints of mis-selling. The company had warned it would “inevitably” go into administration if the proposal was not approved.

But the court sided with the Financial Conduct Authority, which said the lender should come up with another plan and that its proposals unfairly put shareholders ahead of claimants.

Amigo said today that it was still talks with the watchdog, but that insolvency is still an option.

It said: “Following the recent High Court judgment relating to Amigo’s proposed scheme of arrangement, the board of Amigo has reviewed options with the Financial Conduct Authority and discussions are ongoing.

“This could result in a revised scheme of arrangement or insolvency.”

The waiver on Amigo’s facility has been extended several times. An initial extension from July to December last year was meant to give it and its lender time to figure out what impact Covid would have on the business.

It later extended this to June 25 this year, before deciding it needed yet another extension.

Amigo said: “All cash generation arising from customer loans held within the facility is restricted and will continue to be used during the extended waiver period extension to further reduce the outstanding balance of the facility. As of the date of this extension, the facility was drawn at £27million.”

Amigo was founded as FLM Loans in 2005 by James Benamor, who would go on to become a billionaire and has fought an unsuccessful boardroom battle to regain control of the business.

The business offers loans of between £2,000 and £10,000 at an annual percentage rate of 49.9 per cent to people with a poor credit history, if they can find a friend or relative to act as guarantor and be liable for the debt if they default.

The business froze all new lending last December.

It proposed paying around 10p in the pound to past customers who had made complaints of mis-selling, as well as 15 per cent of profits for the next four years.

Its proposals were backed by 95 per cent of creditors taking part in a vote.

But the judgement of High Court judge Mr Justice Miles said the turnout was less than nine per cent of the scheme’s creditors and that the “financially unsophisticated consumer” was given the impression that insolvency would be the “automatic and immediate consequence” of rejecting Amigo’s proposals.