One of the world’s leading foreign exchange vendors is in crisis as financial irregularities and Covid-19 take their toll.
FTSE 250-listed Finablr, the holding company that owns one of the world’s leading commercial foreign exchange firms Travelex, is on the brink of collapse after admitting issuing $100 million in “undisclosed cheques” that were kept secret from its board before its IPO last year.
Finablr also told the market the company is on track to take a heavier-than-expected financial blow from the coronavirus (Covid-19) outbreak.
Currently, Finablr has more than 25 million retail customers across multiple subsidiaries such as Travelex, Unimoni, Remit2India and UAE Exchange, providing foreign exchange services in airports and high streets around the world.
Following the announcement on 16 March 2020 concerning Finablr’s present liquidity situation and ongoing discussions with its lending banks, the company said its Board had engaged an accounting firm to undertake “rapid contingency planning” for a potential insolvency appointment with a view of maximising value in the Group.
Finablr’s chief executive Promoth Manghat promptly resigned following the sudden deterioration in the company’s fortunes which sparked further selling on the London Stock Exchange. The company’s share price slumped to an all-time low of 10.5p on Monday this week, plunging from a high of 209p in mid-December – an eye-watering decline of 95%. The company was worth over £1 billion merely a year ago but is now worth a paltry £77 million and languishing on the brink of insolvency.
In full admission of the grim reality now facing the embattled currency vendor, a company spokesman said: “Constraints have become amplified and have now reached a point where they are having a material adverse impact on the company’s operations, including resulting in the company no longer being able to provide certain payment processing services.”
Moreover, and to further compound Travelex’s existentialist concerns, Finablr said the plethora of travel restrictions imposed by all countries globally, to halt the spread of Covid-19 over the past three weeks, had slashed demand for its services and disrupted the company’s ability to deliver cash to its branches.
Trouble in currency land
Travelex, just like every retail-focused company that relies on foot traffic, has felt the brunt of all-encompassing evaporation of retail demand and is now facing a gauntlet to survive.
As a result of events over the past 10 days, Finablr’s Board made an incredible admission for a listed company, saying it was “unable to assess the financial position of the company” and admitted there is a “material uncertainty” about the group’s ability to continue operations.
With the company’s shares suspended from trading, Finablr’s future is ominous – and so too Travelex’.
“The board is looking to put in place a package of urgent measures aimed at restoring confidence and stability across its stakeholders,” the company said.
As if this story couldn’t get any murkier or convoluted, two days after admitting to financial irregularities and losing its chief, Finablr said one of its subsidiaries, UAE Exchange Centre, had received a notification from the country’s central bank that it would supervise the business “with immediate effect”. UAE’s central bank also decided to deploy its inspection team to examine operations and verify its compliance with applicable laws and regulations.
According to the Financial Times, the central bank ordered owners and senior managers of the Abu Dhabi-based remittance house not to leave the UAE without notice and to preserve documents and correspondence for an immediate investigation.
With economic turmoil intensifying rapidly and consumers largely restricted to self-isolation and quarantines, Finablr faces the prospect of either being bailed out by UAE’s central bank or could potentially be sold to a rival. The prognosis for Travelex is even more uncertain.
The company could yet survive if a buyer is found or is recapitalised by a cash injection from Finablr when (and if) it finds its own salvation. Alternatively, there is also the prospect of it being sold off or mothballed altogether.
The big elephant in the room remains: Covid-19 has zapped the very oxygen on which all market participants rely while the disease continues spreading and taking lives. For Travelex and Finablr to stay solvent, both companies will have to endure a prolonged period, quite possibly over three months, of near-zero revenues while employing over 25,000 people.
UK authorities have thrown billions of capital to support individuals and businesses which means Travelex could yet be rescued by state capital and near zero-interest loans if required.
Only time will tell how quickly Covid-19 is brought under control, but until then, both Travelex and Finablr will feel like they’re warring in the trenches.