Wirecard Creditors Seek More Clarity Amid Talks Over Debt

Wirecard’s lenders are demanding more clarity from the company in return for the extension of almost $2 billion in financing after it breached terms on the loan, people familiar with the matter said.

Atleast 15 commercial lenders, including Commerzbank AG and ABN Amro, are in hectic negotiations about the steps to take after the German payments company said on Thursday it’s unable to release its annual report because it can’t locate 1.9 billion euros in cash ($2.1 billion), the people said.

Concerns over the missing money prompted a collapse in Wirecard AG shares and the departure of CEO Markus Braun, who was replaced on an interim basis by James Freis. In an indication of the company’s worsening outlook, Moody’s Investors Service said on Friday it cut Wirecard’s credit ratings six levels, putting it one step from the lowest tier of junk. With Wirecard potentially facing a default on its debt agreement, the credit rater warned that it may lower the grade further. Wirecard also said Friday that it’s hired investment bank Houlihan Lokey to come up with a financing strategy.

Wirecard could make an announcement accepting outside monitoring and higher transparency as early as next week, and, in return, the banks may not exercise their right to call the loan, one the people said.

The lenders are also considering hiring outside help as they seek to navigate the risk of a potentially massive default, the person said asking not to be identified discussing the private information.

Wirecard has an outstanding revolving credit facility of 1.75 billion euros, according to data compiled by Bloomberg. The German payments company has warned that loans of as much as 2 billion euros could be terminated if its audited annual report isn’t published on Friday.

About 90% of the RCF has been drawn by the company, according to people familiar with the matter and a list detailing the RCF participation that was seen by Bloomberg:


Nominal exposure

(in million euros)

ABN Amro, Commerzbank, ING, LBBW200
Barclays, Credit Agricole, DZ Bank, Lloyds120
Bank of China, Citi, Deutsche Bank, MUFG80
Raiffeisen International70
Raiffeisen Niederösterreich60
Agricultural Bank of China55
Raiffeisen Oberösterreich45

Most of the banks are leaning toward an extension of the repayment obligation in order to better assess the potential impact of a default on their balance sheets, the person said. However, a prolonged extension could be seen as delaying an insolvency, which is illegal under German law.

Spokespeople for ABN Amro, Commerzbank, ING, LBBW, Cregit Agricole, DZ Bank, Citigroup, Deutsche Bank and Raiffeisen Bank International declined to comment. Representatives for the other banks didn’t immediately respond to requests seeking comment.

Wirecard didn’t respond to a request for comment. In a separate statement on Friday the companysaid it’s in “constructive talks” with lending banks.

Read more: Wirecard’s $2.1 Billion Hole Deepens After Forgery Claim

Deutsche Bank Chief Risk Officer Stuart Lewis declined to comment on Wirecard when asked about the exposure on a previously scheduled analyst call on Thursday. However, he said the bank typically hedges its exposure to companies with a low investment-grade credit rating and encouraged analysts to “draw your own conclusions.” Wirecard has a rating that’s one notch away from sub-investment grade.

Moody’s had previously said that Wirecard’s ratings could be lowered to junk. “The current findings are even more material compared to previous allegations, as they refer to the substance of available cash holdings, which had been a key credit strength of Wirecard’s previous rating,” Moody’s said in astatement Friday. The questions looming over the company’s financials also may trigger a “swift decline” in its customer base and transaction volumes, Moody’s said.

Lending Risks

Wirecard’s 1.75 billion-euro revolving facility is due June 2024. Banks in the facility include Agricultural Bank of China Ltd., Bank of China Ltd., Commerzbank AG, Deutsche Bank AG, DZ Bank AG, and Landesbank Baden-Wuerttemberg.

The 1.75 billion revolver has about 800 million euros outstanding, according to Bloomberg data. The company had repaid part of the facility from a 500 million eurosdebt sale last year.

Banks typically take and hold their revolving credit facilities’ commitments for high-grade companies that means most of Wirecard’s lenders may not have offloaded their lending risks in the company.

Read more: Wirecard Credit Swaps Rise to Record Showing High Default Risk

— With assistance by Boris Groendahl

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