(Sharecast News) - Shares in Amigo Holdings more than doubled on Monday after the financial watchdog gave the troubled firm the green light to resume lending.
Amigo, which was forced to halt new lending in March 2020, is seeking approval from the Financial Conduct Authority for a rescue plan after being hit by a barrage of customer complaints over alleged mis-selling. The Scheme of Arrangement is intended to settle thousands of outstanding complaints, cap compensation and enable Amigo to continue trading.
Last year the FCA opposed an earlier version of the scheme, which requires High Court approval. But in a letter sent to the guarantor lender on Friday, the regulator said it did not intend to oppose the latest version when it goes before the court on Tuesday.
It reserved the right to intervene should circumstances change and said its assessment of the firm's ability to return to lending remained ongoing.
But it conceded: "However, recognising the centrality of the firm's proposed return to lending to the development of the schemes...the FCA has concluded, without prejudice to the ongoing enforcement investigation, that the firm could return to lending."
The resumption is subject to a number of conditions, including the scheme being sanctioned by the court and Amigo's new lending system successfully going through outcomes testing. Lending is also expected to be "limited in volume", the FCA noted.
As at noon GMT, shares in Amigo - which provides guarantor loans to people who might otherwise struggle to obtain credit - had soared 117% to 5.97p.
Chief executive Gary Jennison said: "There still remains significant hurdles to overcome before Amigo can deal with its insolvent balance sheet, but this information will help us move forward to the next stage in delivering the best outcome possible, given the circumstance, for our customers, creditors and other stakeholders."
The FCA said: "The firm's scheme proposal represents an improvement on last year's failed proposal, and has the support of the Independent Creditors Committee, that was set up to advance the best interest of those customers owed redress.
"The FCA has also confirmed that the firm could, subject to it meeting certain conditions, resume lending if its scheme is sanctioned by the court.
"If the firm were to return to lending, the FCA will continue to supervise it closely."
Amigo said that the relevant documents were filed with the court on Friday, ahead of the court convening meeting on Tuesday.
Amigo (AMGO)