Wonga victims could end up with nothing

Victims of mis-selling by Wonga may face an uphill struggle to get compensation from the company after it emerged that a Mayfair-based investment fund is in line to get paid ahead of all other creditors of the collapsed payday lender.

Kreos Capital will have first rights over all the proceeds of the Wonga administration, having lent the company nearly €38 million two years ago in a deal that effectively gave it the right to seize all the company’s main assets, including its lucrative Polish operations, in the event that it was not repaid.

About £10 million of the loan is understood to remain outstanding, meaning that as Grant Thornton begins to wind up the business, it will have to raise at least this amount from selling off Wonga’s property before others can get their money back.

It is not unusual for such investment companies to have secured debts in an administration. However, it will make it harder for customers to gain compensation. Unlike Kreos, they will be included with all other unsecured creditors, meaning that they will receive compensation only if there is money left after the firm has been repaid.

Wonga was placed into administration on Thursday after its board had concluded that there was no realistic chance of saving the business amid a jump in compensation claims against the business over mis-sold loans.

Kreos and Grant Thornton did not respond to requests for comment.

Source: thetimes.co.uk

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