Analysts have downgraded foreign exchange Travelex’s credit rating due to questions of its governance as well as its losses from the coronavirus and a hack attack earlier this year.
The questions about its governance are due to Travelex’s ties to the troubled firm NMC Health, a hospital operator, City A.M. reported.
The Financial Conduct Authority (FCA) is currently investigating the company for potential discrepancies, Proactive Investors reported.
BR Shetty is the founder and former CEO of NMC. He and his son also owns 66% of Finablr, which owns Travelex. In January, he placed 56% of Finablr’s share capital as security for borrowing at his own financial vehicle.
That loan caused analysts at S&P Global to be concerned that loans made by Shetty could, if breached, trigger a mandatory repayment of more than €360m in outstanding notes at Travelex.
Moreover, the company suffered a severe malware attack on New Year’s Eve that shut down all of its digital customer-facing operations for almost a month.
That, combined with increasing fears of the coronavirus putting people off from travelling, meant that Finablr faced £25m in quarterly losses last quarter.
Together, these factors led to S&P Global downgraded Travelex’s credit rating from B- to CCC. The agency also placed Travelex on notice for a further downgrade, if corporate governance issues are formally raised by shareholders, or it has reason to suspect a potential breach of the company’s revolving credit facility or of BRSV’s loan.
Travelex has responded that it expects to off-set a material portion of the losses from insurance in relation to the cyber incident. Timing is yet to be determined on when Travelex will receive the insurance payment.
The exchange also said Travelex and Finablr are in discussions with major lenders regarding the terms of the Travelex Revolving Credit Facility.
“We acknowledge that these are unprecedented and challenging circumstances for Travelex,” said Tony D’Souza, CEO of Travelex. “I would like to reassure our customers, partners and employees that we are committed to ensuring the best interests of all our stakeholders as we continue to focus on delivering on our 2020 agenda.”
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