Wirecard’s missing €1.9bn ‘may not exist’
WIRECARD was left fighting for survival after acknowledging that €1.9bn it had reported as assets probably don’t exist, deepening an accounting scandal that has rattled Germany’s financial industry.
The payments processor said it is in discussions with creditors and considering a full-scale restructuring after pulling its financial results for fiscal 2019 and the first quarter of 2020. Previous descriptions of its business with third parties, which process transactions on Wirecard’s behalf, were “not correct”.
Even before yesterday’s statement, the unfolding scandal had seen Wirecard’s shares and bonds collapse, its chief executive depart, and left the company renegotiating debt terms with its lenders.
In less than a week, the fintech once hyped as the future of German finance has lost almost 90pc of its market value, with shares slumping for a third day yesterday.
“It’s a complete disaster we’re looking at,” said Felix Hufeld, head of BaFin, Germany’s
top financial regulator. “It’s a shame that something like that happened.”
Wirecard said it was in “constructive discussions” with its lending banks, including the extension of lines coming due at the end of June. It is working with investment bank Houlihan Lokey on a sustainable financing strategy.
Also under consideration are cost reductions, a restructuring, and disposal or termination of business units and product segments, according to the statement.
“There is a prevailing likelihood that the bank trust account balances in the amount of €1.9bn do not exist,” Wirecard said.
The firm had repeatedly delayed announcing its financial statements, and last week warned loans of as much as €2bn could be terminated if its audited annual report wasn’t published by June 19.
Moody’s Investors Service yesterday decided to withdraw Wirecard’s credit ratings because it “believes it has insufficient or otherwise inadequate information to support the maintenance of the ratings.” It had already cut the ratings six levels on Friday, putting it one step from the lowest tier of junk.
Wirecard’s lenders are demanding more clarity from the company in return for the extension of almost $2bn in financing after it breached terms on the loan, people familiar with the matter said.
At least 15 commercial lenders, including Commerzbank and ABN Amro, are in hectic negotiations about the steps to take.
The missing cash “could trigger an event of default and allow creditors to withdraw lines of credit,” said Justin Tang, head of Asian research at United First Partners in Singapore.
Wirecard has an outstanding revolving credit facility of €1.75bn, according to data compiled by Bloomberg. About 90pc of that has been drawn by the firm, according to people familiar with the matter.
The scandal has prompted the resignation of Markus Braun after almost two decades as CEO. He was replaced on an interim basis by James Freis.