Mon 04/26/2021 10:52 AM
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Spanish credit card provider WiZink will need an additional €9.9 million to cover its usury claims in an adverse case scenario, which assumes 20% more claims than the base case scenario, according to the company’s 2020 report seen by Reorg. This compares to a gap of €33 million in provision between the base case and the worst case scenarios recorded as of Dec. 31, 2019. Continue reading for our EMEA Core Credit team's reporting on WiZink, and request a trial for access to the linked documents as well as our analysis and reporting on hundreds of other stressed, distressed and performing credits.

As of Dec. 31, 2020, the group had recorded a €148.3 million provision for its ongoing usury claims, as aligned with the base case figure in its sensitivity analysis. Based on an adverse case, assuming 20% more usury cases than base case scenario, the group would need €158.2 million to fulfill its usury-related obligations, an additional €9.9 million.

This compares to €243 million adverse-case required provision at the end of 2019, €33 million higher than its base case.

A summary table for the group’s sensitivity analysis is below:

WiZink’s €518 million senior secured PIK notes were up by 1 point today at 79/80, according to Solve Advisors.

The group is facing an increasing amount of usury claims following the usury ruling in March 2020 by Spain’s Supreme Court, which determined its 27.24% interest rate as usurious. The group has lowered the nominal percentage rate, or APR, on its credit card in Spain to 20% from 24% following the ruling.

In March 2021, the European Court of Justice, or ECJ, ruled that Spain’s 1908 antiusury law is not in conflict with European legislation on consumer credit, therefore upholding a March 2020 decision from the Spanish Supreme Court.

WiZink’s fourth-quarter net interest income, or NII, dropped 19.9% year over year to €117 million, largely impacted by Covid-19 related lockdowns and credit card interest rate repricing in Spain to 20% from 24% following Spanish Supreme Court usury ruling in March 2020. Cost of credit for the fourth quarter rose to €109 million, including management overlay of €16 million for potential losses from moratoria exits, €15 million for high-risk sectors and €11 million for macro forward looking additional to the model.

The company recorded 5,155 new claims in the fourth quarter, up from 2,661 in the third quarter, due to the lag from cases related to Covid-19 lockdown following the Supreme Court ruling. Total cumulative claims amounted to 16,076 for 2020, of which 7,107 are outstanding. This compared with 5,601 claims outstanding out of 10,372 cumulative claims in the third quarter of 2020.

A summary of the company’s claims profile is below:

 

Reorg has built a valuation model for WiZink, with equity value of €555 million, or 0.84x book, in base case scenario. An in-depth analysis for WiZink is HERE.

--Shenda Xu, Luca Rossi
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