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Wirecard Shares : Downgraded to Junk Status

Wolfgang Holzem

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The turbulent payment processor Wirecard has to cope with another blow to the neck. After the certificate refused by EY due to the lack of supporting documents for EUR 1.9 billion in trustee accounts (“balance sheet irregularities”) and the crash of the Wirecard shares, the rating agency Moody’s classified it’s shares as junk. 

Moody’s analysts lowered the rating on Friday evening from Baa3 by several levels to B3 (junk). This category is usually avoided by long-term investors. Due to the recent irregularities in the balance sheet, Wirecard bonds are now classified as highly speculative, Moody’s said. A further grading to a C level will be examined.

At the beginning of June, the rating agency announced that it would review the already poor Baa3 rating. Now the analysts refer to the missing receipts for trustee funds worth billions.

Wirecard stock crashes

On the stock market, the gradation in late Friday trading caused prices to fall. After a Xetra close at EUR 25.83 – from the previous day’s loss of almost 62 percent, another daily minus of 35 percent – Wirecard shares fell to EUR 24 after trading hours. The daily low and at the same time the lowest level since the beginning of 2013 had marked the DAX at 19.50 euros.

At the broker Lang & Schwarz, which can also be traded on Saturday, Wirecard shares temporarily traded at EUR 22.25, almost 14 percent below their Xetra closing on Friday.

The daily turnover was exceptionally high at around two million euros.

After Markus Braun’s resignation as CEO, Wirecard shares temporarily recovered to 30 euros.

Update: At the broker Lang & Schwarz, which can also be traded on Saturday, Wirecard shares temporarily traded at € 22.25 today, around 14 percent below their Xetra closing on Friday. The daily turnover was exceptionally high at around two million euros.

The decisive factor for the future of the company will be whether the banks turn off the tap and make use of the option to terminate loans of two billion euros. Wirecard gave investors some hope late Friday evening: The company was in “constructive talks” with its lending banks. According to Wirecard, the banks would be entitled to terminate the contract if the company did not present audited annual accounts but this did not help the share price in the short term.

Evidence of major fraud

Before Braun’s fall, the evidence for a large-scale fraud case had condensed. The Philippine bank BDO Unibank, which allegedly held one of two suspicious escrow (Trust) accounts for Wirecard, said on Friday that the German company was not a customer: “The document claiming the existence of a Wirecard account with BDO is a manipulated document with bogus signatures of bank employees, “it said in the statement of the Southeast Asian banking house and “The case has been reported to the Central Bank of the Philippines.”

The balance sheet scandal centers on two Asian banks and a trustee who has been managing accounts for Wirecard since the end of last year. The accounts reportedly had 1.9 billion euros posted. However, the auditors working for Wirecard now doubt that these 1.9 billion euros actually exist and EY (Ernst & Young) has therefore not audited the annual financial statements.

DWS wants to sue Wirecard

The fund company DWS, which belongs to Deutsche Bank, wants to go to court against Wirecard and its previous boss. “We are suing Wirecard and Markus Braun,” said a DWS spokesman. The head of the DWS flagship fund, Tim Albrecht, told the Frankfurter Allgemeine Zeitung on Saturday: “To protect our investors, we have to find out to what extent the company or Mr. Braun is to be blamed for failures.”

Albrecht emphasized: “We are also calling for a new start for the executive board and the supervisory board. The chairman Thomas Eichelmann has also exhausted all trust after a very short time.” Just a few months ago, DWS had been among Wirecard’s major shareholders with its funds, but most recently it had sold down its holdings. 

As unfortunate the Wirecard crash is for the company and the still committed investors – the future of the once so dazzling German company is currently in a gloomy light.

Given the current facts, it is unlikely that the DAX value will recover sustainably in the foreseeable future.

Former founder of Asiarooms.com and now reporting mainly on the Asia Pacific region and the global Coronavirus crises in countries such as Thailand, Germany & Switzerland. Born near Cologne but lived in Berlin during my early teenage years. A longterm resident of Bangkok, Udon Thani, Sakon Nakhon and Phuket. A great fan of Bali, Rhodes & Corfu.

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Payoneer blocks funds to thousands of users over Wirecard insolvency

Wolfgang Holzem

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As you may have seen on the news, Wirecard AG filed for insolvency on Thursday. Your Payoneer Prepaid Mastercard® Card is issued by its subsidiary, Wirecard Card Solutions Limited (WCSL) in the UK. Today, the Financial Conduct Authority (FCA) which regulates WCSL, issued requirements on WCSL, freezing all prepaid card activity for the time being.  We believe that cardholder funds are properly safeguarded and that the freeze will be temporary. 

What does this mean?

The FCA has communicated that they have taken these measures with the primary objective of protecting the interests and money of Wirecard customers. Pending further actions from the FCA, you will temporarily be unable to withdraw the funds on your card, nor receive new payments onto your card.

Any funds that are in excess of the maximum balance of your card are held by Payoneer and are therefore not impacted by the FCA’s temporary freeze.

How can I get paid during this time?

Any future payments that you receive from marketplaces, platforms and clients will not be affected by the freeze. You can sign in to view your funds, and you can now add your bank account for withdrawal of your future incoming payments.

We are actively working on offering additional options for you and your patience and understanding are highly appreciated. We apologize for any inconvenience this may cause and we’ll update you with more information as soon as we have it.

What they did not mention is that Payoneer IBAN accounts in Germany are managed by Wirecard Bank but if the debit cards don’t work more (issued in the UK) and the funds are already in Wirecard Bank IBAN account, they are technically suspended

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Wirecard : Informs Clients & B2B Partners about current Business Operations

Wolfgang Holzem

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As announced on Thursday, 25 June 2020, the Management Board of Wirecard AG has filed an application for opening of insolvency proceedings on behalf of Wirecard AG with the competent Munich Local Court. With the filing of the insolvency application, Wirecard’s business activities will be continued. The Management Board is of the opinion that continuation is in the best interests of the creditors.

As a first step, the court has commissioned the Munich lawyer Dr. Michael Jaffé as an official expert. Whether insolvency proceedings will be opened is still under review. The Management Board of Wirecard AG expects a provisional insolvency administrator to be appointed for Wirecard AG shortly.

The business operations of the Group companies (https://www.wirecard.com/contact/worldwide) including the licensed units are currently ongoing. The parent company performs some central functions for the subsidiaries. As previously reported, it is being continuously reviewed whether insolvency applications also have to be filed for subsidiaries of the Wirecard Group. With the exception of a small development branch office, no insolvency applications have been filed by Group companies at present.

Wirecard Bank is currently not part of the insolvency proceedings. the electronic funds transfer of Wirecard Bank are not affected. Payouts to merchants of Wirecard Bank will continue to be executed without restrictions. Further information on Wirecard Bank AG can be found at wirecardbank.com. The licensed legal entities, and where appropriate, Wirecard AG, remain in close contact with the respective regulators. Furthermore, we are in constant contact with the credit card organizations.

Wirecard Card Solutions Limited, headquartered in Newcastle, UK, has suspended its business operations due to an order issued by the competent supervisory authority, Financial Conduct Authority. The company has discussed measures with the authorities. The measures are being undertaken and will hopefully enable it to continue operations.

The TPA business in question is still under review. The newly appointed CEO of Wirecard AG, James H. Freis, Jr., took a new approach to investigating the known allegations immediately upon taking office. Among other measures, a number of new advisors were commissioned to ensure neutrality and, in particular, independence from the former Management Board members of Wirecard AG. The clarification efforts will, of course, continue even after the filing of the application for the opening of insolvency proceedings.

Contact:
Iris Stöckl
VP Corp.Com./IR
Tel.: +49 (0)89-4424-1424
e-Mail: iris.stoeckl@wirecard.com
http://www.wirecard.com
ISIN DE0007472060
Reuters: WDI.GDE
Bloomberg: WDI GY

Document pulled via Reuters Terminal by Wolfgang Holzem on behalf of Dr. Robert Bowitz, accredited by the German BDP
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Deutsche Bank is considering taking over Wirecard Bank

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At the beginning of the week it still looked as if Wirecard’s Bank would also go into bankruptcy because too much customer money had meanwhile flowed out – now it is becoming clear that Deutsche Bank could take over in whole or in part. The Bank is examining possible financial aid in coordination with BaFin, the insolvency administrator of Wirecard AG and the management board of Wirecard Bank, a spokesman said.

According to German media reports, at least one financial investor has also expressed an interest in Wirecard Bank.

The financial supervisory authority Bafin had appointed the Bundesbank as a special representative at Wirecard Bank, who should ensure that no funds flow to Wirecard AG and that business continues.

Wirecard Bank has a full banking license and can offer all financial services. Since the beginning of the year, it has been promoting 0.75 percent interest on checking deposits on the “Boon Planet” banking app, while other institutes hardly pay any interest or even charge fees for fixed deposits.

If the bank had gone bankrupt, the deposit guarantee fund of the private banks would have compensated customers who did not withdraw their money on time.

On the balance sheet, Wirecard Bank is not a heavyweight. According to internal sources, at the end of March it had total assets of 1.6 billion euros, which roughly corresponds to a medium-sized savings bank. The equity at the end of the quarter was 205 million euros and he bottom line was a surplus of 4.7 million euros at the end of the quarter, after 40.8 million in the same quarter of the previous year.

What motives drive Deutsche Bank is still unclear. “We are one of the largest banks in the payment traffic worldwide and that is one of our strengths, a real core business area,” Deutsche Bank board member Fabrizio Campelli told Handelsblatt in an interview published on Friday and “if there are opportunities to strengthen ourselves, we will look at them.”

Deutsche Bank may be targeting Wirecard Bank’s corporate customers in payment transactions, although the first have already turned away. Since the beginning of July, for example, the discounter Aldi Süd has no longer processed credit card payments through the insolvent payment service provider, but through the provider Payone, as the company explained on Thursday. 

The cooperation with Wirecard Bank has since been limited to business with the Aldi gift card. But this has no consequences for customers.

The connections between Wirecard and Deutsche Bank are complex anyway. Last year, on the initiative of the Wirecard Group, there were even informal merger talks with Deutsche Bank, which, however, broke off quickly as Bloomberg news agency reported first. In addition, the bank temporarily granted company founder Markus Braun a private loan of EUR 150 million secured with Wirecard shares.

In addition, one of the auditors, who was responsible for checking the Wirecard balance sheet at EY in 2017, switched to Deutsche Bank in 2018 as chief accountant.

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