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Wowwo Q&A

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215 comments

  • Official comment
    Annija (Mintos)
    Community manager

    Latest news about Wowwo

    14th of April, 2022

    On the 14th of April, we had In Recovery Ask Me anything session.

    Please see the specific part here, where the Wowwo situation is explained in detail: https://www.youtube.com/watch?v=Mn0LOZKQr-8&t=2580s

    29th of March, 2022

    Following up on the lengthy negotiations with the Turkish lending company Wowwo, where Mintos has taken a strong position to reach an agreement that is satisfactory for Mintos investors, Wowwo management provided an unacceptable proposal that would give not more than a 25% recovery level over a 36 month long recovery period, which was shared on our Monthly recovery updates.

    We thank you for understanding that this kind of negotiation is a subject of confidentiality, as strategic communication with the other party is one of the key tools in such a process. When it comes to outcomes of negotiations during different phases, we are glad to inform you about them as soon as possible.

    Since several questions have been brought up about hedging in relation to the Wowwo case, we’d like to share more clarity on this topic. Hedging is an effective tool for managing currency exchange risks. Since 2020, when the pandemic started, we have been more insistent that the lending companies hedge their currency exposure. On the other hand, some currencies can't be effectively hedged, as there is virtually no derivative (forwards, futures, options) market for them. Our experience shows that a well-run company with a good financial standing can withstand turbulent times and repay its debts, regardless of currency hedging. Hence we look into equity and asset position, group strength, portfolio size and health, amongst other things, to assess the company. 

    Prior to the deterioration of the Turkish Lira, our evaluation and insight into Wowwo’s financials showed the lending company as a well-managed business with good financial standing. This can also be seen in Wowwo’s Q3 2021 financials.

    Some of you have also brought up the following question: “How could Wowwo have a high Mintos Risk Score if they did not hedge their currency risk?”. Here we would like to remind investors that hedging is included in the assessment of the Mintos Risk Score. It is one of the many factors included in the calculation of subscore Buyback strength that is one of the four subscores that make up the Mintos Risk Score. Taking this into account, we’d like to reiterate that based on multiple factors assessed, Wowwo displayed good performance, with a good-quality loan book and strong financials.

    Also, some investors let us know that they weren’t aware Wowwo issues loans to Turkish consumers in the currency used in the country, the Turkish Lira (TRY), and not in EUR. We’d like to remind you that each assignment agreement that comes with the investment in a loan part and is the governing document for the investment, describes the currency in which the loan was issued. Furthermore, information on Wowwo's page on Mintos includes documents such as loan agreements, financials and others where the currency in which the loans are issued is stated. We explain this further in our Help Center. Nevertheless, after investors’ feedback, we made this information more visible across the platform for your convenience, for example, the loan details page.

    We assure you that we are evaluating all strategic approaches to the Wowwo case, including potentially pursuing legal action, to achieve the best possible results for investors on Mintos.

     

    10th of March, 2022

    In lengthy negotiations where Mintos has taken a strong position to reach an agreement that is satisfactory for Mintos investors, Wowwo management provided an unacceptable proposal that would give not more than a 25% recovery level over a 36 month long recovery period.

    Besides finding the amount and the timeline unacceptable, there is also a lack of certainty that the company will follow the recovery plan even with the amount proposed, and a complete lack of valid arguments that would serve as a basis for the proposal, such as the cash flow forecast model.

    Answering investors' concerns related to hedging, we would like to highlight that it is included in the assessment of the Mintos Risk Score for the lending companies, but it's only one of many aspects we take into account.

    Since 2020 we became more insistent on the Lending Companies hedging their currency exposure. However, some currencies can't be effectively hedged, as there's virtually no derivatives (forwards, futures, options) market for it.

    It should be also noted that FX risk is just another one among credit, macro, political, legal, and many other risks. If a particular kind of risk cannot be hedged, we mitigate it by requesting from the lending company more security in other areas, like having more stringent Equity/Assets covenants and so on.

    Wowwo, with its shareholding companies, had the equity/asset balance that seemed more than sufficient to cover any potential future losses. As we underlined in answers before, the issue with Wowwo is the lending company's unwillingness to meet its duties, and this is why we're preparing for a new course of action in this case.

    We will share all new details when we have new information. 

    3rd of February, 2022

    The core event that moved this previously successful collaboration into status “suspended” arose from the currency risk that materialized for Wowwo after the Turkish Lira saw a major decrease in value against the Euro in December 2021. Wowwo is issuing loans in Lira, while on Mintos investors are investing in these loans in Euro. Without currency hedging in place, Wowwo is facing a situation where they have a significantly greater cost to buy the needed amount of Euros to make payments due to Mintos investors. This drove the lending company to a decision to disconnect its API communication with Mintos, and stop making repayments to investors while negotiating proposals to deal with the currency losses.

     

    In our conversations, the lending company had suggested that instead of transferring due amounts in Euro, it would transfer borrower’s repayments in Turkish Lira at the current exchange rates, which would lead to a loss for investors in Wowwo loans on Mintos. We respectfully denied this proposal.

    Current status

    Wowwo not making payments that are due and not delivering the required information about the portfolio performance is a breach of the Cooperation Agreement.

    Mintos has sent Wowwo a notice about a material event of default, accelerating the total exposed amount of €18.5 million and stating Wowwo's obligation to repurchase all loans within a few business days after this notice. Not adhering to this request would be a breach of contract on Wowwo’s part.

    Our credit risk committee worked to propose solution alternatives, and we shared them with Wowwo. We came to a solution for restructuring that we believe will achieve the best outcome for investors on Mintos. Our position is that investors shall receive due amounts in Euro in full, restructured to account for the company’s challenging situation due to their currency exchange position.

    Next steps

    We continue our work to achieve the best possible results for investors, in the least given time. In most of the recovery cases, the best results are achieved with negotiations. We won’t make assumptions about the possible outcomes of the following developments in negotiations with Wowwo, but we do promise investors that we’re fully engaged to exercise all options. If it turns out that negotiations don’t lead to a satisfactory agreement, we will follow the next steps described in the Mintos recovery process which also entails the legal route.

    We will inform you as soon as we have news to share.

    Thank you for your understanding and patience.

  • Lucie Lauda

    How did they want to pay it in turkish lira?

    0
  • JARMO VILLE VIIKKI

    Yes, please no Turkish Lira. It was not according to original contract to get it in Liras. I lent euros, and I want euros back. I am living in euro zone, not in Turkey.

    In my opinion, they should take advantage on the currency fluctuation and convert even some extra Liras into euros in days when the rate pumps so that they will have less pressure on days when the rate dumps.

    I am not 100% familiar with Transferwise, but I believe this could be a good service for them to take advantage of currency fluctuations. 

    They should also negotiate to raise more capital (and immediately convert it in euros), then borrow Liras from Turkish banks/investors (and convert it into euros to repay to the investors). When they have more equity it should be easier to raise also debt.  

    2
  • Lucie Lauda

    I wouldnt mind turkish lira it could be a good deal

    -7
  • João Neves

    Thank you for the update Annija (Mintos).

    Keep up the good work and keep us posted.

    I'm still hoping for a full recovery including the interest accrued during the period funds were in recovery. Let's see how the situation unfolds.

    6
  • ODYSSEAS SARRIGIANNIDIS
    good as we convert loan in turkish lira but go interest 20%   and 1 Euro = 15 liras

    this is better


     

    -5
  • Cyril F

    THAT IS CRAZY !  HOW THEY CAN STOP PAYING ?

    First if we have to loose money no problem we accept risk but wowwo too so they have to go bankrupt if they made wrong choice.

     

    Second it's better to loose money and get rid of wowwo than lossing money AND LOOSING TIME. TIME IS THE ONLY THINGS WE CAN'T RECOVER !

    -3
  • TOBIAS STRUBE GRAEM

    Hi,
    I think Mintos should provide a lot better transparency on this topic going forward.

    When I as an investor see loans in EUR, I expect that they are actually made in EUR and not in any other currency which can provide a clear risk to me - it could just as well have been in Nigerian Naira or Mexican Peso... (I wouldn't have any chance to check it anyhow)

    Also I would DEFINITELY expect a company to have hedges in place if they are swapping their local currency into EUR to sell them on Mintos. Otherwise it should have a very bad rating!

    Can I expect that all loans in countries which has a different currency than EUR has done the same trick?
    How can I ensure if a company mitigate currency risks going forward?

    Mintos should provide these details for all loans if applicable!

    10
  • PJM

    Yes..I agree with Tobias. 

     

    0
  • DANIEL MUNIZ MOREIRA

    Dear fellow investors,

    Mintos is regulated by the FCMC of Latvia- Financial and Capital Market Comission. The FCMC is aware of Fintechs such as Mintos, as can be seen by their recent discussion: "on 9 December 2021, the Financial and Capital Market Commission (FCMC) with FinTech sector partners held an online discussion “Latvia – as the New Home for Global FinTech.", in which Mintos participated.

    FCMC objective is to take care for the public interests by regulating and monitoring the functioning of the financial and capital markets, by protecting the interests of investors, depositors and the insured persons, including financial literacy, the development and stability of the financial and capital markets.

    I consider that Mintos failed to properly disclose risks associated with currency fluctuation when offering loans in euros from Wowwo and classifying Wowwo as a safe lending company. I filed a complaint against Mintos within FCMC. FCMC´s email address is fktk@fktk.lv.

    4
  • DAVID ALFONSI

    Annija (Mintos) Would be possible to gain visibility on how much in % would be the recovery if the payment would be performed by Wowwo in TRY and converted to EUR? I am asking because if the currency loss is e.g. 25% but the probability of losing all the money going via the legal way is 50% you might want to consider to give the investors the opportunity to vote. As they say around here "better an egg today than a chicken tomorrow".

     

    2
  • Pi

    well, I think the idea that Wowwo will pay back nearly 20 M euros is unrealistic, credit companies as a rule do not use their own money. now, I understand that they are also something like a second-hand car dealership , but that is just the same - that means they trade cars, and they are buying them with borrowed money. SO, they may move a lot of money ( both in TRL and EUR ), but most of them are not theirs. and, yes, they are in breach of contract, but even if mintos succeeds in wining in court: it raises two questions :
    1. when - litigation can drag ( and will ) for years
    2. what exactly is the win - that they should meet their obligation?! that means that a company that actually lost money, will pay even more money in few years ( we can safely assume that TRL/EUR will not get much better ). obviously, they will go bankrupt

    the other side, is to accept payments in TRL, but that means to accept it for the next months and years.
    in order to be acceptable for us, that also means huge bump in interest rate. however, no risk will be mitigated: currency trl/eur (will already invested euros) and load default ( obviously their buyback obligation is amount to nothing ). and even if this deal is made, they are still in breach of contract , so litigation cannot be avoided.

    also, as I understand, we actually have no info about how wowwo loans we invested in, are performing at the moment, and we can safely assume that it's worse ( some loans are late ) than what we see in mintos . that is simply outrageous.

    I will suffer huge loss as a percentage from my investments, even my conservative mintos strategy has 10% in wowwo loans, but since there are dozens more originators who can go that way ( no currency hedge ), I think it is very important how mintos will handle the situation - wowwo should be wiped out(bankrupted) if necessary, but you cannot behave the way they did - stop paying without any notice and no proactive actions on the originator side.

    it will be wise also for the future that Mintos requires from any loan originator to mitigate currency risk by providing some capital buffer perhaps(based on some what-if scenario if currency depreciates 20%), maybe some currency option offered to investors if they want to receive the money in the loan currency with a proper increase for the interest rate, or to put it more simply - if loan currency depreciates against investor currency, raise the interest rate on current loans, issue new loans only in loan currency for some time,...

    2
  • JARMO VILLE VIIKKI

    It is a great chutzpa from Wowwo side to even offer Liras when they received euros from us. 

    In my opinion, they should restructure the loans into one big one with timely repayment plan.

    The next step: To comply the repayment plan. When Lira gets stronger, then make some future repayments (and also save some interest costs). 

    Look for outside funding sources in Liras. Perhaps from their domestic banks, local investors etc. Try to raise their prices for the customers to generate more income. Cut expenses (for instance, less staff, shorter office hours etc).

    0
  • Rodrigo Valle Teixeira

    Let me start by saying I really like Mintos. It is an awesome platform, easy to use, and I've had good returns up to this point. I really want to continue with it. But...

    I agree with the majority here on currency information and risk. One of two things need to happen in order for me to keep investing with Mintos in the future:

    Option 1 - The advertised currency of a loan MUST be the real currency, not a conversion to Euros, so that strategy filters work for the actual loan currency.

    Option 2 - For loans that include a currency conversion, the LO MUST contractually prove to have a hedge, a deposit, something that works as a guarantee against exchange fluctuations, for that loan to be included in a strategy filter as a loan in Euros.

    Rodrigo Valle - Portugal

    3
  • Annija (Mintos)
    Community manager

    Thank you all for your active participation. We follow the conversation and appreciate your insights on the topic!

    1
  • Sam Ferencik

    Mintos could force its partners to disclose the real currency but I think that's chasing rainbows. Wowwo would comply, say 90% of their loans are in TRL, some (even in Turkey) are in EUR, some are in in Azerbaijan or wherever... But that's just one of many ways things can go awry.

    If Wowwo issued loans to Turkish car-buyers in EUR, we would all be feeling safer but now the Turks themselves would be defaulting, unable to pay the EUR loans from their TRL salaries. It would be the same problem, just shifted down the line. Or Turkey could go into a financial crisis (2008-style), with people defaulting for other reasons (despite the TRL:EUR rate being stable). Or Wowwo could make poor business decisions, misjudge the market, go bankrupt for another reason.

    I understand the frustration here about Mintos not advertising this type of risk earlier, and perhaps going forward they should. But I wouldn't sleep better for it. Loans are an inherently risky business, as expressed in the interest rates. I'm sure Mintos's rate-setting models already consider precisely this (and many other) situations.

    1
  • Richard

    Thank you for the feedback Mintos.

    Please continue with your current approach to this situation, which I support.

    It is clearly not on to suggest that investors should convert their holdings into Turkish Lira. Wowwo wished to borrow in Euros to take advantage of lower interest rates - the flip side of this is that they must take the currency risk. If they didn't properly manage this risk that it a problem for them - investors are entitled to their money back, plus interest accrued in Euros, as lent.

    1
  • Oliver

    As for what Sam is saying: if the borrowers defaulted on a EUR loan we would be able to get/sell the car that was provided as collateral. However right now we don't have that option given that the actual borrower is likely still fulfilling their contract (they took out a TRL loan and are paying that back) - it's Wowwo who is not.

    As for all the discussion about what Mintos could or could not have put into the contract with Wowwo. It would not matter right now - Wowwo is in breach of contract as is. If there were further contractual details they'd simply be in breach of those as well and litigating to bring them into compliance takes time and money (things none of us want to spend if it can be avoided).

    Where I do agree with everyone is that Mintos could be doing a better job at highlighting the currency risk involved with unhedged EUR loans. Because while the risk is with the LO - if they are unable (or unwilling) to deal with it once that risk materializes it's still the investors who'll be holding the bag. Given that highly rated (less risky) loans give LOs the advantage of lower interest rates I feel that the lack of a currency hedge should be given a heavier weight in the Mintos risk score.

    0
  • Drive ApS

    I see several topics in this discussion:

    First and formost the undisclosed currency exposure. I only select investments without the risk of currency fluctuations. Apparently that is, despite my active choice, not the case in reality. That is a Mintos Model problem. Especially as the company wants to act as a proper financial institution with full disclosure.

    Secondly -- looking at the track record of Mintos, when it comes to collecting bad debt from lending companies, that has not fulfilled their obligations, this is a worrying situation we find our selfs in.

    Out of the some EUR 6,600 I have in recovery only one lending company is paying small instalments on a regular basis (Express Credit). The rest are unchanged month after month. I find it very strange that lending companies can get off the hook so easily.

    It would also suit Mintos with more open and honest discussions with its investors about these matters. You quite often get polished standard replies that insults our intelligence. Typically communication about recovery and other matters only focuses on the successes, which in the case of my portfolio, were small and insignificant in comparison to the losses.

    Over the years I have come to realise that Mintos does not always have the necessary bargaining position to be able to create a reasonable balance in favour of the investors. The lending companies, at least the well run companies, have too many funding alternatives and thus bargaining power. That is a problem. A problem that - if unresolved - will lead to more losses in the future.

    4
  • Pierre C

    The point is having an update from mintos once a month is not enough. Couldn’t they be more in task force mode and speed up the process. Meanwhile the money is not flowing…

    2
  • PABLO RODRIGUEZ FERNANDEZ

    Wowwo have our money and getting beneficts with them. They have to assume their risk and pay the money that they debt.

    My automatic portfolio put 800€ in the last days before the default, so i will not see anything with mintos policies (last loans invested last loans recovered). Its funny, because i get the loans when the lira is very similar to now. xD

    1
  • DAVID ALFONSI

    To me the main issues can be summarized in the following:

    1. Inadequate risk flagging on Mintos side on currency exposure;

    2. lack of currency hedging;

    3. Wowwo not paying when currency was on their side on 22-28/12/2012;

    4. Mintos refusing to be paying back in Turkish Lira by Wowwo (25% loss?) without asking investors and now facing a possible 100% loss.

    I think point 1,2 and 4 could be something to be improve on Mintos side.

    Thanks

    David

    1
  • JARMO VILLE VIIKKI

    I bet the majority of the investors (especially the ones with larger exposure) refuses to accept 25 % currency loss caused by the gambling of the Wowwo management. 

    The Mintos loans should be refianced, they need to look funding from their domestic markets and each time the currency pumps, it is time pay bigger chunk (for instance, the future repayments) so that when the currency dumps they can breath a little while. 

    Personally, I would be looking to get the entire money back, not just 75 %. And in euros as I invested in euros. Let us keep the contracts, shall we.

    0
  • DAVID ALFONSI

    hello JARMO VILLE VIIKKI - well obviously 100% is better than 75% but please refer to the recovery update table: https://www.mintos.com/en/funds-in-recovery-updates/ ; only about 20% of the defaulted companies are recovered at 100% which is why I would not disregard an instant recovery of funds in TRY versus the possibility of recovering nothing at all.

    0
  • Oliver

    The problem being that we're not talking about a 75% instant recovery. What Wowwo proposed was to transfer the TRL amounts as they come in. So if the TRL keeps tanking against the EUR the amount you'd receive would keep plumetting over the duration of the loan.

    0
  • JARMO VILLE VIIKKI

    Hello Oliver,

     

    Wowwo is a business that is still running. It is not a payday lender that is under very high risk as the defaults are generally astronomical in companies like these as they do not have collaterals whatsoever. 

    0
  • Luis Filipe Da Rocha Alves

    Hi all, it was a complete suprise for me all this situation. When loans are put in the market in Euros, there is no reason to think they are being lent in Lira - this is a huge miss by Mintos and they should clearly improve their processes and disclosures. On the other hand Wowwo holds a loan portfolio in lira, so their clients are not aware Wowwo needs to repay the loans in Euro - Minto's guys can you confirm this? is Wowwo actively informing their clients that they need to pay more Lira to cover the loans in Euros - Minto's guys can you confirm? A possible solution is for Wowwo collect back the vehicles, sell it and settle the loans but i dont see how this can be attained if the client is not aware they need to settle Euros and not Lira...as vehicles are a real asset their price in Lira should be worth much more now and that by itself should cover the exchange differences. 

    Those questions being posed, i have to say i'm quite disappointed with Mintos - this a basic rule and a error that is not tolerable as all the bigshot guys in the board and the CEO are all stars (or not, as this demonstratres). I've already started sellling all my loans and divesting from Mintos - they have lost all my confidence and became untrustworthy for.

    0
  • Cyril F

    @... how can you loose a legal trial against wowwo?

     

    Why fo you preferer investor loosing money instead of wowwo going bankrupt ?

    0
  • TOBIAS STRUBE GRAEM

    Dear Mintos, can you please comment on the concerns in this community thread?

    Will you agree that Mintos has been lagging information about currency risks for the different loans and lending companies?

    Can we assume that all loans towards lending companies outside of the EUR-zone are having the same risks? Kazakhstan for instance? Which are hedged?

    If I cannot get a clear answer to this, I will be liquidating the rest of my portfolio as well.

    I will require these informations before proceeding with any investments on this platform.

    Br Tobias

    3
  • Luis Filipe Da Rocha Alves

    I've requested Mintos yesterday a list of my loans that are facing the same situation..whether there are similar situations but got no response up to now! This is quite disturbing! Meanwhile i'm unwinding all my funds from Mintos.

    1

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