German BaaS outfit Solaris struggles to meet requirements for the Adac credit card contract

Solaris, a German Banking-as-a-Service company, recently admitted to struggling to raise funds necessary to meet the terms of a major credit card contract it entered with Adac.

Solaris won the contract last year, and it is supposed to be a decade-long deal, where the company would be issuing Adac-branded credit cards to the club’s 21mn members. However, new reports suggest that the company is struggling to meet the requirements, as it reported a €56 million loss in the fiscal year 2022.

The contract was expected to increase the firm’s yearly sales by over €100 million, and last year, the firm even saw €130 million in revenue. However, the fiscal year 2022 was not nearly as successful.

Solaris’ financial woes

Previously, the firm made an attempt to raise money earlier this year, in July. The attempt resulted in €38 million raised, but this was not enough. Now, the firm is trying to raise another €100 million in funding, which is necessary in order to make an upfront payment to Adac.

The funds would allow it to meet the regulatory capital requirement for taking on the motor association loan book of €500 million.

Solaris has allegedly been talking to some of its existing backers, such as Visa, the US credit card company, as well as BBVA, a Spain-based lender. The talks reportedly included the €100 million needed to deliver on the contract. For the time being, the talks remain ongoing, although they have been put on hold for the moment due to the adverse market environment, according to sources familiar with the situation.

Solaris reportedly told its backers that it would need more capital next year, and for now, it remains to be seen whether the backers are willing to agree to its request or not.

Adac is offering other banks to team up with Solaris

Furthermore, a report published by FT said that Adac has reached out to several other banks that placed bids on the original contract, including the Deutsche Bank, DKB, and Hanseatic Bank. The company inquired whether any of these entities would be willing to team up with Solaris and work on the contract with it.

One of the potential solutions to Solaris’ problem is for one of these banks to take over the €500 million loan book on their balance sheet, thus reducing Solaris’ need to seek additional capital. So far, there is still no confirmation that any of the banks are interested in doing so, and this remains only one potential solution that Solaris and Adac are considering in order to solve the matter and move forward with the contract.