Wirecard breaking up is taking shape: Time is of the essence

Wirecard breaking up is taking shape

08/21/2020, 4:03 p.m. | rtr

Wirecard headquarters in Aschheim near Munich (symbol picture): The Brazilian business of the insolvent group is sold. (Source: Peter Kneffel / dpa)

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The Wirecard Group filed for bankruptcy at the end of June. Now it is to be smashed: Among other things, the Brazil business goes to a competitor. The money should flow to the creditors – investors will not see any of it.

Wirecard insolvency administrator Michael Jaffe is making the first progress in breaking up the payment processor that collapsed in an accounting scandal. For the Brazilian subsidiary with around 200,000 customers, Jaffe has found a buyer in the domestic payment service provider PagSeguro Digital, which is listed on the New York Stock Exchange.

In Great Britain, Jaffe is about to sell the operational business of Wirecard Card Solutions, which primarily processes online transactions for fintech companies and issues credit cards. There are also interested parties for the US subsidiary and the German core business, Jaffe announced on Friday.

Time is of the essence: by the end of August he must have clarity as to which parts of Wirecard can be recycled or which can survive on their own. At least some of the approximately 1,500 German employees are threatened with dismissal.

Around two billion euros turned out to be air bookings

The insolvency proceedings for Wirecard AG and half a dozen German subsidiaries will officially open on September 1. Before that, Jaffe has to present his insolvency report on the state and prospects of the deeply fallen company to the court. The German employees only receive insolvency money from the employment agency until the end of August, after which the workforce would have to be paid again from the company’s coffers.

But Jaffe must not accumulate any further losses that would be borne by the creditors. The Verdi union assumes that a third of the domestic jobs can be saved if Jaffe gets the core business sold as a whole.

Wirecard had to file for bankruptcy at the end of June after 1.9 billion euros turned out to be non-existent on the balance sheet. According to the Munich public prosecutor’s office, the Wirecard managers have artificially inflated the balance sheet with air bookings in Asia over the years and thus concealed losses in their core business. Banks and investors alone have been cheated by more than three billion euros.

Investors are unlikely to get anything from the breakup

Two years ago, the company was worth almost 25 billion euros on the stock exchange, and on Friday the share was traded for the last time in the leading index Dax. It fell from more than 190 euros to 1.32 euros.

The shareholders will probably see nothing of the proceeds from the break-up. Because the creditors alone are likely to demand around four billion euros. According to estimates by insiders, the sale of the individual company parts could bring in around a tenth of that. PagSeguro did not comment on the purchase price for Wirecard Brazil.

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Further sales processes are ongoing. The British Wirecard Card Solutions is basically in agreement with the rival Railsbank on the sale of the technology and the customer base. The rest of the business there is likely to be done.