Finablr has warned it is in danger of going out of business as the global payments and foreign exchange group battles problems including questions over its financing arrangements and the effect of the coronavirus outbreak on its operations.
The FTSE 250 group and Travelex owner said on Monday that its board had been informed of $100m of undisclosed cheques written by group companies before its initial public offering in 2019 “which may have been used as security for financing arrangements for the benefit of third parties”.
These meant Finablr could no longer “accurately assess the financial position of the company”, it said, adding there was now “material uncertainty about the group’s ability to continue as a going concern”.
The group’s chief executive Promoth Manghat has resigned and the company’s shares have been suspended. It has appointed Kroll, the corporate investigations consultancy, to carry out an independent investigation of related-party transactions and off-balance sheet debt. A committee of Finablr’s non-executive directors will also carry out a review of its liquidity and cash flow management functions, its financial and debt position and its options.
The announcement is the latest blow for the business empire of UAE-based billionaire BR Shetty, Finablr’s founder and majority owner. He also founded NMC Health, the healthcare group whose shares have been suspended after it discovered evidence of potential fraud amid mounting questions over its finances and ownership.
Some of the financial irregularities disclosed at NMC Health involve off-balance sheet financing arrangements made without the board’s knowledge.
Mr Manghat’s brother, Prasanth Manghat, was fired as NMC’s chief executive last month.
Only last week Finablr said that its board had been reassured that it had “no undisclosed related-party transactions or unrecorded on or off-balance-sheet financing arrangements” following discussions with executive management, shareholders and independent auditors.
Finablr’s share price closed at about 11p on Friday, giving it a market capitalisation of £73m, down from 170p a share at the start of the year.
The group owns UAE Exchange, a remittance business founded by Mr Shetty in 1980, and Travelex, which it acquired in 2014. It floated in London in May last year at about 170p, giving it a market capitalisation of more than £1bn. Its majority owner is BRS Ventures, the company controlled by Mr Shetty, which revealed in January that some of this stake had been pledged as collateral for debt.
Finablr has been hit by a series of crises including a damaging cyber attack on Travelex — the world’s largest retail currency dealer — at the start of the year and the impact of coronavirus, which has meant that people have stopped using its exchange services in airports.
Last week the group warned over its ability to access cash needed to manage its business as well as negotiate longer term financing. It said on Monday that these problems “have become amplified and have now reached a point where they are having a material adverse impact on the company’s operations”. These included it no longer being able to “provide certain payment processing services”.
UAE Exchange on Monday said it would suspend new transactions at its branches because of “operational challenges”.
Abu Dhabi sovereign wealth fund Mubadala has a 3.4 per cent stake in Finablr, it was disclosed on Monday.
People close to Finablr believe the stake may be a signal that Abu Dhabi is willing to take part in a potential turnround of the group. Mubadala declined to comment,
Travelex outlets remain open and are trading as usual.
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