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(Sharecast News) - Shares of Amigo Holdings rallied on Monday after the Financial Conduct Authority said it would not go to court to oppose the subprime lender's rescue plans.
The FCA said in a letter: "The firm's scheme represents an improvement on last year's failed proposal and has the support of the Independent Creditors Committee, which was set up to advance the interests of those customers owed redress.
"The scheme is still being voted on by eligible customers. The FCA reserves the right to intervene if facts and circumstances change."
Under the proposals being put forward by Amigo, its "preferred solution" would see customers who were missold loans receive up to 41p in the pound in compensation from a potential £116m cash pot if the business is allowed to start lending again.
However, if the business is wound down, customers would receive between 33p and 37p in the pound, with the compensation coming from interest on pre-existing loans.
A previous scheme which would have seen customers receive just 10p in the pound was thrown out by the High Court last year after objections from the FCA.
Chief executive officer Gary Jennison said: "We thank the FCA for its confirmation that there has been a significant improvement in the fairness of the schemes compared with Amigo's first scheme, which was rejected by the Court in May 2021.
"We also welcome the confirmation that the FCA does not consider it necessary to appear at the sanction hearing to oppose the schemes or to present any evidence of its own concerning the Schemes. These confirmations are positive steps towards delivering the best outcome possible, given the circumstances, for our customers, creditors and other stakeholders.
"There remain significant obstacles to overcome, including the need for a significantly dilutive equity issue, to recapitalise the ongoing business given the requirements of the schemes for the transfer of virtually all existing assets to the redress creditors."
At 1420 BST, the shares were up 15% at 5.23p.
