Pipeline Data (OTCBB:PPDA), a provider of payment processing and services, today announced that it has entered into restructuring agreements with its convertible noteholders, as well as with the holders of a $16 million put claim against the Company.
The transaction was led by The ComVest Group ("ComVest").
Under the terms of the transaction, the current $37 million, 8% coupon preferred convertible notes due June 29, 2010 will be restructured as a $42.1 million loan, 10% coupon until June 30, 2010 and a 14% coupon until June 30, 2011. The Company will have the option to extend the notes for an additional year until June 30, 2012, at its sole discretion. The agreement calls for the removal of all convertible equity features and the immediate termination of 11.1 million detached full-ratchet warrants.
In addition, the $16 million, 18% put right held by the former owners of Charge.com, Inc. will be redeemed for $2 million in cash, the return of the Charge.com name and the return of 9,398,058 shares of the Company's Common Stock.
ComVest Investment Partners III, an affiliate of the ComVest Group, will lead a $15 million initial investment in cash for the purposes of restructuring the balance sheet and acquiring new merchant account portfolios and other operating companies. As part of the investment, the Company shall issue ComVest a $15 million face amount preferred convertible stock instrument convertible into common stock of the Company at 12.2 cents per share with a 16% payment-in-kind (PIK). Total shares outstanding post transaction will be approximately 41 million common and 122,950,820 preferred convertible shares (initially convertible into 68% of the Company's Common Stock). Total debt will be reduced from $53 million to $42 million when taking into consideration the current combined $37 million convertible notes and the $16 million extinguishment of the put obligation. ComVest will also make available to the Company an additional $15 million acquisition line of credit, maturing September 30, 2012.
Concurrent with the transaction, Pipeline's entire Board of Directors will resign and a new Board will be formed, including ComVest Partner and Advisory Board Member Peter J. Kight. With more than 25 years of experience, Mr. Kight is a pioneer in the electronic commerce industry, including serving as founder and former chairman of the board and CEO of CheckFree. He currently serves as the Vice Chairman and member of the board of directors of Fiserv (NASDAQ:FISV). Mr. Kight joined Fiserv when the company acquired CheckFree in 2007 for $4.4 billion in cash. In addition, Mr. Kight is a member of the board of directors of Akamai Technologies (NASDAQ:AKAM) and Manhattan Associates (NASDAQ: MANH). Accompanying Mr. Kight to the Pipeline Board of Directors will be Randall McCoy. Mr. McCoy served as CheckFree's executive vice president and chief technology officer and will become Pipeline's new Chief Executive Officer and a member of the Board. Mr. McCoy has also enjoyed a long and distinguished career in the electronic payments industry. He lectures annually to the Federal Reserve's Board of Governors on matters of electronic commerce. Daniel Nenadovic, a Managing Director and Partner of ComVest will join the Company's Board of Directors and serve as Chairman of the Board. MacAllister Smith , the Company's current founder and Chief Executive Officer, will resign as Chief Executive Officer and assume the position of Vice Chairman of the Company.
MacAllister Smith stated, "While it has been a challenging time in the financial markets in general, and in the financial services sector in particular, I believe there are excellent opportunities to increase market share for strong, well-capitalized companies that focus on their core competencies. The restructuring of our debt from a 2010 maturity to as long as a 2012 maturity removes a substantial amount of near term risk, while the infusion of new cash capital allows Pipeline to take advantage of strategic acquisition and marketing opportunities as they present themselves. I am very excited about the appointments of Pete Kight to our Board and Randy McCoy as new CEO, and believe their extensive experience in the industry will open many vistas for Pipeline. In addition, ComVest brings a multitude of market knowledge, expertise and deal flow that will further strengthen Pipeline and help the Company to achieve its objectives. I am very much looking forward to working with Randy, Pete and the ComVest team and believe their proven, dynamic business strengths will help to make Pipeline a leader in the payments processing sector."