Wirecard administrator starts to dismantle defunct payments group

Via Financial Times

Wirecard’s administrator said “numerous” companies have expressed interest in buying parts of the payments group that last week became the first member of Germany’s prestigious Dax index to file for insolvency.

Michael Jaffé, one of Germany’s leading specialists for complex insolvencies, will soon ask investment banks to oversee the potential sale of some of Wirecard’s units.

Long regarded as a German tech champion, Wirecard collapsed into insolvency last week after revealing one of Europe’s worst accounting frauds in decades. The group’s shares have plunged by about 95 per cent, wiping out more than €12bn in stock market value.

In a statement released late on Tuesday following the first meeting of a committee of creditors, Mr Jaffé said the main objective was to keep Wirecard’s subsidiaries in business and stabilise its operations. As a payment processor, Wirecard generates revenue by taking a cut of merchants’ transactions.

A sale of Wirecard’s subsidiaries needs to happen within weeks or they will lose any remaining value, said people familiar with the matter. “Wirecard has very few physical assets, and the risk is that many of its clients will switch to rivals soon,” said one of the people.

The administrator, who was appointed by a Munich court last week, did not disclose the names of any potential buyers.

The crisis engulfing Wirecard has already disrupted services for customers who relied on the German group’s technology to make payments via fintech apps. The UK’s Financial Conduct Authority last week imposed a ban on the activities of its British subsidiary, Wirecard Card Solutions, but lifted the restrictions on Monday.

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Wirecard North America, formerly Citigroup’s Prepaid Card Services business, which Wirecard acquired in 2016, earlier this week set out a sale process and said its operations had not been upended.

The administrator’s intervention came as police on Wednesday raided Wirecard’s headquarters in a Munich suburb for the second time in four weeks as part of an investigation into suspected false accounting and market manipulation by the group’s former chief executive Markus Braun and others, Munich prosecutors said. 

Raids were also under way at four more premises in Germany and Austria by 12 criminal prosecutors, 33 police and additional IT specialists. 

“Given the expected scope of the expected evidence that needs to be secured, the search needed to be prepared intensively,” the prosecutors said in a statement. They declined to comment further.

Mr Braun was arrested last week and released on €5m bail. He has denied any wrongdoing.

German prosecutors have also issued an arrest warrant for Jan Marsalek, Wirecard’s former chief operating officer, according to people familiar with the matter. Mr Marsalek’s lawyer did not respond to a request for comment.

Wirecard’s new chief executive, James Freis, has urged employees, many of whom are still waiting to be paid their salaries for June, to focus on keeping operations running.

“Regarding the range of good products and services that serve good customers and partners . . . we as a team need to work together to keep moving forward in an orderly way,” Mr Freis wrote to staff over the weekend in an email seen by the Financial Times.

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Mr Freis was originally hired to run Wirecard’s compliance department but was catapulted into the chief executive role as the group unravelled last week.

Wirecard has about €3.5bn of debt and its creditors, including a consortium of 15 banks, are braced for heavy losses. Earlier this week, Wirecard loans were sold for less than 20 cents on the euro to distressed-debt investors, according to people familiar with the transaction.

Wirecard Bank, the group’s Germany-based lender, is not part of the insolvency. Germany’s banking watchdog BaFin ringfenced the bank from the stricken group and installed a special representative to monitor it.