Wirecard AG said the lack of 1.9 billion euros ($2.1 billion) of cash on the balance sheet does not exist, the latest in a spectacular fall from grace for a company once seen as the future of the German fintech.
The payments company has withdrawn from its recent financial results and said that the previous descriptions of the business with third parties who process transactions on Wirecard’s behalf, were “not correct”. Even before the beginning of Mondaydeclaration, the deepening scandal had seen Wirecard stocks and bondscollapse, its chief executive officerthe departure, and has left the company to renegotiate its debt with its lenders, in a struggle for survival.
The company said it was in “constructive discussions” with its lending banks, including the extension of the lines coming due at the end of June. He works in collaboration with the investment bankHoulihan Lokey on a sustainable funding strategy. Is also the study of cost reductions, restructuring, and the elimination or termination of business units and product segments, according to the release.
“There is a dominant probability that the bank balances of trust accounts in the amount of 1.9 billion euros do not exist,” It said, drawing results for the year 2019 and the first quarter of the year 2020. The firm had repeatedly delayed the announcement of its financial statements, and the last weekwarned that loans of more than € 2 billion could be terminated if its annual report has not been released by June 19.
Read more about how to Wirecard became a source of embarrassment for Germany
Wirecard lenders requiremore clarity from the company in consideration for the extension of nearly $ 2 billion in funding after having violated the terms of the loan, people familiar with the matter said earlier. At least 15 commercial lenders, including Commerzbank AG and ABN Amro, are in all of the negotiations on the measures to be taken, they said.
The lack of cash “would trigger an event of default and allow creditors to withdraw credit lines,” said Justin Tang, head of Asian studies at the Organization of the First Partners in Singapore.
Wirecard has a outstanding amount of the revolving credit facility of € 1.75 billion, according to data compiled by Bloomberg. Approximately 90% of the FCR was developed by the company, according to people familiar with the topic and a list detailing the setup of the participation that was seen by Bloomberg:
(in millions of euros)
|ABN Amro, Commerzbank, ING, LBBW||200|
|Barclays, Credit Agricole, DZ Bank, Lloyds||120|
|The bank of China, Citi, Deutsche Bank, MUFG||80|
|Agricultural bank of China||55|
It is difficult to know how the admission will affect the discussions with the banks. Most are leaning toward an extension of the obligation of reimbursement in order to better assess the potential impact of a default on their balance sheets, one of the people said. However, a long extension could be considered to delay an insolvency procedure, which is illegal under German law.
Moody’s Investors Service announced on Friday that it will cut Wirecard the credit ratings of six levels, putting it one step from the lowest level of junk.
Shares of Wirecard were reduced 72% last week, as the scandal has resulted in Markus Braun resignation after nearly two decades as CEO. He has been replaced on an interim basis by James Freis.
Read more about how Braun has to relax the pledged shares
Deepening the mystery about the lost money centered on two Filipino lenders, after It said a couple of unnamed Asian banks had not been able to find the accounts of the treasury.
The Bank of the Philippine Islands and BDO Unibank Inc. says Wirecardwas not a customer and that they had not seen the money. No lack of cash is entered on the Philippine financial system, according to the nationcentral bank, which is conducting its own investigation.
A document designed to show a link between Wirecard and the BPI was “bogus”, and may be part of an attempted fraud, the bank’s President Cezar Consing said on Friday. BDO Unibank chief executive officer Nestor Tan said that it was a matter of “identity fraud, which was subsequently clarified by the bank as being wrong.”
Wirecard continues to investigate the matter and may not exclude potential effects on the financial accounts of the previous year, it said in the statement.
— With assistance by Edwin Chan
(Updates with analyst’s comment in sixth paragraph)