Amigo Holdings PLC (LSE:AMGO) shares leapt from their recent lows after the UK financial watchdog said it does not currently plan to oppose the guarantor lender's schemes of arrangement and set out the conditions by which it could restart lending again.
The Financial Conduct Authority (FCA) sent a letter after market close on Friday to Amigo, providing an update on its position, after carrying out an assessment of the schemes and their compatibility with its rules.
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In December the company unveiled a new scheme proposal to meet redress claims relating to historic loans and in January it announced a rights issue to raise the cash to settle complaints from customers relating to its business practices over the previous decade.
The board has put forward two schemes that aim to "deliver the best possible outcome to scheme creditors" while it addresses its historic lending complaints: the first is contingent on lending restarting and Amigo completing a successful equity raise, while the second would be to wind down Amigo Loans.
Having perused the documentation and supporting evidence ahead of a court decision, the FCA said its current position is that "it does not presently intend to appear by counsel at the convening hearing and does not anticipate, at this stage, that it will oppose the schemes or have further direct engagement with the court at the convening hearing".
The FCA said it reserves its position in respect of the schemes and its right to intervene, both generally and/or if facts and circumstances change, and expects to be kept informed of all relevant matters relating to the process of the schemes.
In relation to Amigo's proposed return to lending, the FCA said this would need to be subject to the following conditions being met: a new business scheme being sanctioned by the court with FCA being satisfied that the firm meets certain threshold conditions, satisfactory testing of potential outcomes of the the new lending system by the FCA, and any other issues that may arise.
"If the conditions above are met, we expect the return to lending to have taken place no later than nine months after the new business scheme effective date," the FCA said.
As for potential fines, the watchdog confirmed that it may still consider a financial penalty is appropriate, but will take into account the priority of scheme creditors "to ensure any fine does not impact the amounts payable to creditors under the schemes".
Gary Jennison, CEO of Amigo said: "We thank the FCA for providing this level of clarity about its position on the proposed Schemes of Arrangement. There still remain 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 circumstances, for our customers, creditors and other stakeholders."
Amigo's shares more than doubled to 5.6p in early trading.