Short-term lender Wonga has been saved from bankruptcy through a £10m bailout from a consortium of technology investors, reports today have revealed.
The company has been saved by a number of prominent investors after its chief exec warned shareholders the firm was on the brink of collapse a few weeks ago.
Sky News today reported that venture capital funds and long-term investors Accel Partners and Balderton Capital are involved in the rescue.
Read more: Controversial payday lender Wonga to return to profitability
A fundraising has taken place at a valuation of around $30m (£23m), a huge decline from a few years ago when Wonga had lofty ambitions to float in New York with a $1bn valuation.
The news outlet said Tara Kneafsey, Wonga's chief exec, has told directors that a slew of complaints about its loans before rules were changed in 2014 has led to the payday lender handing out large sums back to customers in compensation.
Read more: Will Wonga pay a price for its customer data breach?
Wonga's board is also reportedly assessing the sale of its assets as cashflow has become so restricted.
In a statement a Wonga spokesperson said:
Wonga continues to make progress against the transformation plan set out for the business.
In recent months, however, the short-term credit industry has seen a marked increase in claims related to legacy loans, driven principally by claims management company activity.
In line with this changing market environment, Wonga has seen a significant increase in claims related to loans taken out before the current management team joined the business in 2014.
As a result, the team has raised £10m of new capital from existing shareholders, who remain fully supportive of management's plans for the business.
The company has haemorrhaged cash over the last few years, and in 2016 slumped to a £65m loss, although it was eyeing up a return to profitability last year. It's expected to report results in the next couple of weeks.
In 2017, Wonga hit another hurdle when it said the details of 245,000 UK customers and 25,000 customers in Poland had been stolen in a cyber attack.
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