EZCORP Restructures Repayment Arrangement With AlphaCredit
04 October 2017 - 7:42AM
EZCORP, Inc. (NASDAQ:EZPW), a leading provider of pawn loans in the
United States and Mexico, today announced that it has entered into
an agreement with Alpha Holding, S.A. de C.V. (“AlphaCredit”) to
modify certain existing agreements relating to EZCORP’s sale of its
Grupo Finmart business to AlphaCredit in September 2016.
As part of the original agreements, Grupo Finmart (which is now
owned by AlphaCredit) issued two promissory notes to EZCORP in an
aggregate principal amount of $61 million, with $52 million being
payable in U.S. dollars and an amount equivalent to $9 million
being payable in Mexican pesos. The principal amount of the
notes was to be repaid in three annual installments on the first,
second and third anniversaries of the closing (September 27, 2017,
2018 and 2019, respectively), with interest being payable
quarterly.
Under the modified agreement, which is effective September 27,
2017, the $61 million principal amount, plus accrued interest, will
be paid on a monthly basis between now and September 27, 2019,
which is the original maturity date of the notes. The
aggregate principal amount still remains repayable within the
original timeframe, and the effect of the restructuring is to shift
payments from the earlier portions of the period to the later
portions of the period.
As consideration for the payment restructuring:
- The per annum interest rate has been increased from 4% to 10%
for the dollar-denominated note and from 7.5% to 14.5% for the
peso-denominated note.
- EZCORP will receive an additional deferred compensation fee of
$14 million, payable $6 million on September 27, 2019, $4 million
six months later and $4 million six months after that.
- Upon any prepayment of the notes, Grupo Finmart must pay, in
addition to all outstanding principal and accrued interest, an
amount equal to (1) all remaining interest payments that would
otherwise be due through the end of the term and (2) the deferred
compensation fee. If the notes are prepaid in full on or
prior to June 30, 2019, the deferred compensation fee will be
reduced to $10 million.
- The notes, as amended, are now guaranteed by Grupo Finmart’s
parent, AlphaCredit.
- AlphaCredit has terminated EZCORP’s indemnification obligations
with respect to representations and warranties under the original
Purchase Agreement relating to the Grupo Finmart sale, has
terminated all existing indemnity claims and has released to EZCORP
$4.1 million that was being held in escrow pending resolution of
indemnification claims.
Stuart Grimshaw, EZCORP’s Chief Executive Officer stated:
“AlphaCredit requested a payment restructuring in order to
accommodate their increased working capital requirements as they
continue to grow their business, and we were willing to accommodate
their request as long as the restructured arrangement benefited
EZCORP from both a risk and return perspective.
“The modifications we agreed to are advantageous to EZCORP and
its shareholders for a number of reasons. First, the
increased interest rates and the additional $14 million payment
represent significant enhancement to the original payment
arrangement. Second, moving to a monthly payment schedule for
the remaining two years lessens our risk in that we receive regular
payment in a more timely manner. Third, the release of the
$4.1 million escrow six months ahead of schedule partially offsets
the deferral of the first annual payment that we were to have
received last week. And finally, the release from potential
ongoing indemnification claims eliminates a contingency and
overhang on our own business.
“We have been pleased with our relationship with AlphaCredit.
Over the past year since we completed the sale of Grupo Finmart,
AlphaCredit has already paid us $34 million that was owed to us in
connection with the sale transaction. This new agreement with
respect to the remaining amount owed represents a positive outcome
for both of our companies — it provides AlphaCredit with the
capital it needs to continue its strong growth in the short-term
and provides us with an improved risk and return profile.”
Additional information about the modified arrangements can be
found in EZCORP’s Current Report on Form 8-K filed with the U.S.
Securities and Exchange Commission contemporaneously with the
issuance of this release.
ABOUT EZCORP
EZCORP is a leading provider of pawn loans in the United States
and Mexico. We also sell merchandise, primarily collateral
forfeited from pawn lending operations and used merchandise
purchased from customers. EZCORP is a member of the Russell
2000 Index, S&P SmallCap 600 Index, S&P 1000 Index and
Nasdaq Composite Index.
FORWARD LOOKING STATEMENTS
This announcement contains certain forward-looking statements
regarding the payments to be received from Grupo Finmart. These
statements are based on the company’s current expectations as to
the outcome and timing of future events. All statements, other than
statements of historical facts, that address activities or results
that the company plans, expects, believes, projects, estimates or
anticipates, will, should or may occur in the future, including
future financial or operating results, are forward-looking
statements. Actual results for future periods may differ materially
from those expressed or implied by these forward-looking statements
due to a number of uncertainties and other factors, including risks
related to the performance of the Grupo Finmart business. For a
discussion of these and other factors affecting the company’s
business and prospects, see the company’s annual, quarterly and
other reports filed with the Securities and Exchange Commission.
The company undertakes no obligation to update or revise
forward-looking statements to reflect changed assumptions, the
occurrence of unanticipated events or changes to future operating
results over time.
Contact:
Jeff ChristensenVice President, Investor RelationsEmail:
jeff_christensen@ezcorp.comPhone: (512) 437-3545
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