Wonga Saved From Bankruptcy After £10m Cash Injection

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Photo by Jeff Djevdet from Flickr

Today, some reports revealed that Wonga, a short-term lender, has been bailed-out from bankruptcy through a £10 million bailout that came from a consortium of technology investors.

The firm has been saved by a group of prominent investors following the warning of its chief executive. She warned the shareholders that the company was on the verge of collapse during the recent weeks.

Today, Sky News reported that venture capital funds and long-term investors such as Balderton Capital and Accel Partners are involved in the said rescue.

A fundraising has occurred at a valuation of approximately $30 million (£23 million), a massive drop from a few years ago when Wonga had high ambitions to float in New York with a valuation of $1 billion.

The news outlet said that the chief executive of Wonga, Tara Kneafsey, has informed the directors that a series of complaints regarding its loans before the rules were changed in 2014 has resulted to the payday lender distributing huge sums back to its customers as compensation.

Also, the board of Wonga is reportedly assessing the sale of the assets of the company as its cash flow has become very restricted.

In a statement that was released by a spokesperson of Wonga, he stated: ”

“Wonga continues to make progress against the transformation plan set out for the business.”

He added: “In recent months, however, the short-term credit industry has seen a marked increase in claims related to legacy loans, driven principally by claims management company activity.”

The spokesperson continued: In line with this changing market environment, Wonga has seen a significant increase in claims related to loans taken out before the current management team joined the business in 2014.

He concluded: “As a result, the team has raised £10m of new capital from existing shareholders, who remain fully supportive of management’s plans for the business.‎”

Over the recent years, the firm has haemorrhaged cash and in 2016, it dropped to a loss of £65 million, even though the company was eyeing up a return to profitability in 2017. The company is expected to report its results in the next couple of weeks.

Last year, Wonga experienced another difficulty when it said that the information of 245,000 and 25,000 of its customers in the United Kingdom and in Poland, respectively, had been illegally accessed in a cyber attack.