The new CEO James Freis and Supervisory Board Chairman Thomas Eichelmann had been negotiating with the approximately 15 creditor banks since the penultimate Friday. Under the leadership of Commerzbank, Landesbank Baden-Württemberg and the two major Dutch banks ABN Amro and ING, they granted Wirecard a credit line of EUR 1.75 billion about two years ago. Of this, 800 million euros were exhausted, which the banks could have due on June 30, and 500 million euros by the July 1 deadline.
The banks were surprised by the bankruptcy report last Thursday. Until recently there were constructive negotiations with the group, it said from circles of the consortium. The designated bankruptcy administrator Michael Jaffé is now in charge. On Wednesday evening, insiders had hoped for a so-called waiver, an extension of the credit line until the end of the year. This would have given the new management the chance to restructure the company while it was operating.
In addition to the difficulty of identifying the valuable parts of Wirecard, in particular the profitability of the European and American business, according to the Handelsblatt, intervention by the financial regulator Bafin from Wednesday to Thursday was the decisive factor in declaring bankruptcy.
The Bafin had emphatically given Freis and Eichelmann to understand that one could not take the risk of a bankruptcy delay or the outflow of further funds, according to several people familiar with the process. Compliance expert Freis, whom Wirecard had only recently poached from Deutsche Börse, was particularly aware of the associated liability issues and possible criminal consequences. The supervisory authority did not want to comment on the process on request.
What future opportunities are there?
Even if the insolvency report for the holding company – Wirecard Bank AG and the national companies are not affected – in the end there was no way around, the external impact for the group was devastating. Aschheim believes that the Bafin and the FCA, the British regulator that had imposed the freeze on the company’s operations, would have torpedoed the restructuring efforts. There is no way around a breakup of the group, several insiders believe.
Shortly before bankruptcy, the group management had gone through various options. For example, there was a profitable business case for the European core business. According to insiders, the first interested parties are already knocking on Wirecard, including private equity houses, competitors and investment banks on behalf of unnamed third parties. However, many are looking for information or customer portfolios, less interested in the Wirecards technology, which would be a bad signal for the approximately 5000 employees.
According to information from the Handelsblatt, interested parties include the French payment processor Worldline and the competitor Nets from Singapore. Worldline and Nets did not want to comment on the process on request. How serious the interest is is open. Worldline is currently facing a major takeover, taking over competitor Ingenico for almost eight billion euros. The two companies will become one of the largest payment service providers worldwide. Ingenico is active in Germany through a joint venture with the German savings banks, and Nets also has a German unit with Concardis.
Dutch competitor Adyen is not interested. He always emphasizes that he generally does not make any acquisitions and rather wants to grow on his own. His stock hit another record high last week.
A management buyout of individual subsidiaries is also currently being considered. In addition, there is already a growing list on the net with the data of over 400 Wirecard employees who are looking for a new employer.
How do customers react?
Wirecard’s customers are increasingly unsettled due to the difficult situation. The first partners, including the Grab driver service and the Revolut smart phone bank, have already gone off the flag.
The decisive factor now is how the two major credit card networks Visa and Mastercard react. If this Wirecard withdraws the licenses for issuing and accepting their credit cards, the group would have a big problem. If these license agreements were terminated or canceled, the business activities of Wirecard or Wirecard Bank would be “significantly impaired”, it said in the 2018 annual report.
According to Bloomberg, Visa and Mastercard have already started contacting Wirecard customers to prepare them for the possibility that Wirecard’s access to their networks could be withdrawn. The news agency appeals to people familiar with the matter.
How does the internal education work?
The questioned third-party business will be examined, the group said on Saturday: “The newly appointed CEO of Wirecard AG, James H. Freis, Jr., immediately took up a new approach to investigating the known allegations upon taking office.” Among other measures , which were not explained in more detail, new consulting firms were commissioned “to ensure neutrality and, in particular, independence from the previous management board of Wirecard AG”.
The mandate of the Ufer Knauer law firm, which was only switched on a few weeks ago, was revoked – the public prosecutor, however, was quite satisfied with the cooperation so far. Instead, the Luther firm took over.
According to the branch service Juve, however, the collaboration with the Gibson Dunn law firm was limited. She has been in a central position at Wirecard for a long time, and has been advising on questions of corporate and capital market law as well as compliance issues for years. The lawyers at Gleiss Lutz are said to have taken over a large part of the tasks. The law firm is currently also involved in another major scandal: It advises the Volkswagen Supervisory Board on the diesel scandal.
In the Wirecard scandal, there is growing evidence that real money in the millions could have flowed into unknown channels. According to Handelsblatt information, investigators, lawyers and auditors have found more and more inconsistencies in recent days. Specifically, it should include a purchase at an inflated purchase price in India. This acquisition was the largest in the company’s history in October 2015. In addition, investigators are tracking the flow of unsecured loans that have been granted and whose actual recipients are unclear.
What are the political ramifications?
In view of the scandal, the federal government wants to terminate the contract with the German Audit Office (DPR). State Secretary Jörg Kukies confirmed in the “Financial Times” that in future the Bafin will investigate directly instead of commissioning the DPR. So far, the DPR, which is organized under private law, controlled the balance sheets on behalf of the state. Kukies called the Wirecard affair a wake-up call to address long-standing problems. Radical solutions would have to be found. The German government is currently discussing exactly what the new structures should look like.
The Bafin itself remains criticized. The Bafin Board of Directors meets on Monday to deal with the question of why the authority did not intervene earlier. The authority had already received inside information on irregularities in early 2019.
“There was a total failure of all control mechanisms. Supervisory board, internal auditing, auditor and bank supervision – nobody has fulfilled their responsibilities, ”criticized the green finance expert Sven Giegold. “It is completely incomprehensible that internally and externally nobody got to the bottom of the gross disagreements,” said the MEP.
Bafin President Felix Hufeld will have to answer questions on Wednesday in the Finance Committee. He had already admitted mistakes made by his authority. Structural problems also played a role: Bafin looked after Wirecard Bank, but was not responsible for the rest of the group. On request, the Bafin referred to the German inspection body: “The DPR alone is responsible for the audit of the balance sheet. And we immediately commissioned them. The test took so long there, ”said the Bafin on request.
According to the “Frankfurter Allgemeine Zeitung”, only one employee in the DPR has been entrusted with the investigation of the allegations in the past 16 months. “At Bafin, a large number of employees were involved in the Wirecard case, across different business areas,” emphasizes Bafin.
The Bafin and the DPR are now threatened with lawsuits: Berlin lawyers Marc Liebscher and Wolfgang Schirp have announced that they are preparing class actions for “state liability”. The reason is the failure of the supervisory authorities in the Wirecard case. “It is clear from the press reports and statements from those responsible that Bafin and DPR have made blatant mistakes. For this we will sue the Federal Republic of Germany for damages for our clients, ”explained Liebscher.
Where’s Jan Marsalek?
Wirecard’s long-standing CEO Markus Braun surrendered to the Munich public prosecutor’s office last Monday and was released from custody on Tuesday for a deposit of five million euros.
Jan Marsalek, the former organization director and Asia manager who has been dismissed, is still at large. An arrest warrant has been issued against him. Most recently, Marsalek was suspected in the Philippines. He is said to have traveled to China from there, but video recordings of the airport do not show him leaving the country. Marsalek’s lawyer did not want to comment on the allegations and his whereabouts when asked.
The most recent suspicion was that Marsalek could face the investigators around the Munich chief prosecutor Hildegard Bäumler-Hösl, an expert on difficult economic crime cases, earlier this week. Now you are no longer sure, according to those around you.
More: It is not a good idea that Wirecard will stay in the Dax for the time being, comments Carsten Herz.