Clock’s ticking: Payday lender Wonga is ‘on the brink of collapse’ following a spike in customer claims
Embattled payday lender Wonga is facing insolvency, just three weeks on from receiving an emergency £10m cash injection.
The London firm is expected to appoint Grant Thornton to act as its administrator if its board decides Wonga cannot avoid falling into insolvency, Sky News first reported.
Today's administration fears follow several enquiries from claims management companies looking to call-in compensation requests, buoyed by Wonga's fresh funding from the beginning of this month.
Executives from Wonga are understood to have already entered talks with the Financial Conduct Authority (FCA) in the last few weeks to discuss its various options going forward.
Sources told Sky News that a so-called pre-pack administration, similar to the House of Fraser buyout earlier this month, is also being considered. The deal would save a portion of the firm's 500 jobs.
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Before the £10m injection, Wonga was valued at just £23m. Several major venture capital firms own stakes in Wonga, including Balderton, Accel and 83North.
The firm had been targeting a return to profitability, after losing around £65m in 2016. Its full-year 2017 results are expected to be published in the coming weeks.
A spokesperson for Wonga reiterated a comment made earlier this month:
"Wonga continues to make progress against the transformation plan set out for the business.
"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.
"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.
"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."
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Wonga was fined £2.6m by the FCA in 2014 for sending letters to 45,000 customers, posing as law firms which in actuality did not exist.
The news marks a significant fall for the lender, which just five years ago was considering a public listing on the New York Stock Exchange.