Wirecard AG expects its provisional insolvency administrator to be appointed shortly as the scandal-hit payment company said its business activities will continue.
Once lauded as one of Germany’s most successful up-and-coming businesses, Wirecard filed for insolvency after the company said that 1.9 billion euros ($2.1 billion) previously reported as cash on its balance sheet probably doesn’t exist.
In a statement, the company said its management board believes continuation of operations “is in the best interests of the creditors.” That includes its banking unit, which is currently not part of the insolvency proceedings.
“The electronic funds transfer of Wirecard Bank are not affected,” the company said in the statement. “Payouts to merchants of Wirecard Bank will continue to be executed without restrictions.”
Wirecard said it’s ceding control of funds at its banking unit after Germany’s financial regulator stepped in to prevent the money from being deployed elsewhere at the company. Wirecard Bank AG is not part of that process and BaFin has appointed a special representative for the unit.
The fallout from the company’s shocking collapse reverberated over the weekend after Germany’s state-owned development bank KfW said it’s facing potential losses of 100 million euros from a credit line that its unit granted the company in September 2018.
Other banks are on the hook for about 1.6 billion euros in loans, people familiar with the matter have said. The group of more than a dozen lenders led by ABN Amro Bank NV, Commerzbank AG and ING Groep NV were in negotiations with Wirecard aimed at keeping it afloat and were surprised by the insolvency filing, Bloomberg reported.
Despite claims to continue with business as usual, digital bank Curve temporarily froze services, Financial News reported, citing a company spokesperson.
Curve is one of a number of UK-based fintech firms that relied on Wirecard’s services.
Also on Friday Financial Conduct Authority, the UK’s financial markets regulator, imposed a number of requirements including that it must not dispose of any assets or funds. Wirecard is not supervised by the FCA.