Amigo Loans has suspended trading in its shares ahead of a hearing that could allow it to start lending for the first time in more than a year.
The guarantor lender said it had taken the step over concerns that market-sensitive information could be released during a High Court hearing about its proposed financial plan, which would offer £97mn to creditors.
The company’s share price has fallen by more than 66 per cent over the past year, despite a modest rise of 6.6 per cent since January.
If the court approves the scheme of arrangement, it would mark a turning point for Amigo, which has sought to improve its image under chief executive Gary Jennison.
Amigo stopped lending in November 2020, citing uncertainty around the Covid-19 pandemic. It has been unable to resume its business because of a struggle over compensation for historic mis-selling.
The company has faced complaints from consumers who accused it of failing to check whether their loans were affordable.
A previous scheme of arrangement proposed by Amigo was rejected by the Financial Conduct Authority, which stated that it unfairly benefited shareholders over customers.
The watchdog has not intervened in the new plan, which offers better compensation for customers and seeks to raise additional funds through a rights issue. The FCA said in March that if the court approved the scheme and Amigo met lending conditions, the company could return to lending.
If the court does not permit the scheme of arrangement, the company will instead ask it to approve a wind down of the business.
The regulator has clamped down on so-called non-standard finance providers in recent years amid concerns of rising consumer debt.
The number of active high-cost, short-term lenders in the UK fell by almost a third between 2016 and the third quarter of 2020, according to FCA figures. One of the closures was Wonga, once the UK’s largest payday loans provider, which filed for administration in 2018 amid a surge of customer complaints.
Others, such as subprime lender Provident Financial, have moved away from serving those with the worst credit scores, leaving this group with a paucity of options for accessing loans. There are concerns around poorer borrowers’ exposure to illegal moneylending and loan sharks.
In March, Provident Financial chief executive Malcolm Le May told the Financial Times that many of those deemed “high risk” for credit were turning to buy now pay later, a popular form of interest free credit that has been accused of driving up consumer debt.
