A group of about 15 banks led by ABN Amro Bank Commerzbank and ING Groep had been negotiating next steps with the firm on a €1.75bn facility that was about 90 percent drawn, people with knowledge of the matter said earlier this week. Photo: Krisztian Bocsi/Bloomberg
A group of about 15 banks led by ABN Amro Bank Commerzbank and ING Groep had been negotiating next steps with the firm on a €1.75bn facility that was about 90 percent drawn, people with knowledge of the matter said earlier this week. Photo: Krisztian Bocsi/Bloomberg

Banks face €1.6bn losses after Wirecard files for insovency

By Steven Arons and Eyk Henning Time of article published Jun 25, 2020

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JOHANNESBURG - Wirecard’s main banks are facing potential losses on about e €1.6 billion (R31bn) of loans to the scandal-hit fintech after it started insolvency proceedings.

A group of about 15 banks led by ABN Amro Bank Commerzbank and ING Groep had been negotiating next steps with the firm on a €1.75bn facility that was about 90 percent drawn, people with knowledge of the matter said earlier this week. 

Talks on next steps with lenders came to an abrupt halt with the insolvency filing that surprised some of the banks, people with knowledge of the matter said.

Wirecard’s decision to file for insolvency caps the swift downfall of the financial firm once lauded as one of Germany’s most successful up and coming businesses. 

The bank’s descent quickened earlier this week when it said that €1.9bn previously reported as cash on its balance sheet probably doesn’t exist, triggering a collapse in the shares and a criminal investigation. 

Ex-chief executive Officer Markus Braun surrendered to police after an arrest warrant was issued. He’s since posted bail and is no longer in custody.

Wirecard’s subsidiary Wirecard Bank is not included in the insolvency proceedings, Bloomberg has reported. Deposits at the bank are insured to an amount of as much as €19.7 million  per clients, the German banking association said by email.

Lenders to Wirecard didn’t terminate the loan and didn’t precipitate the insolvency, people familiar with the matter said. Banks had granted Wirecard a short reprieve, deciding not to force the firm to repay the loans right away while assessing the company’s long-term prospects, Bloomberg has reported.

Wirecard also has an outstanding bond worth €500m and a convertible bond worth €900m. 

BLOOMBERG 

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