Excel Announces Financing with BlueAcre Ventures
Excel announced it recently completed a $4.4 million financing transaction with BlueAcre Ventures, including the sale of $100,000 of the company’s merchant residual portfolio for cash of $2.8 million and performance-based payments of a further $400,000 over the next three years, combined with a $1.2 million, three-year term loan.
The transaction provided for the company’s wholly owned subsidiary, Payprotec Oregon LLC dba Securus Payments (Securus) to repurchase $200,000 of monthly merchant portfolio residuals previously sold to E-Cig Ventures (E-Cig), resulting in increased cash and expected net finance cost savings of approximately $0.6 million per year.
On June 30, 2014, the company entered into a Settlement and Release Agreement with E-Cig, settling all amounts due and exercising its option to repurchase $200,000 of monthly merchant portfolio residuals previously sold under the Residual Purchase Agreement and related Option Agreement executed by Securus and E-Cig on January 28, 2014. Under the terms of the settlement, the company paid $2.4 million in cash and issued a note to E-Cig for $300,000, payable in 12 equal monthly payments starting on October 1, 2014, at a six percent annual interest rate (the Note). Upon final payment of the Note, E-Cig shall surrender 1,000,000 shares of the Company’s Common Stock originally issued to E-Cig in connection with the Company’s purchase of E-Cig’s 10% membership interest in Securus in April 2014.
Simultaneously with the settlement, the company executed new financing arrangements with BlueAcre whereby Securus sold $100,000 of its monthly residuals for an immediate cash payment of $2.8 million, with the ability to receive additional cash payments totaling $400,000 over the next three years. BlueAcre also loaned $1.2 million to the company under a promissory note bearing simple interest of 15% per year that may be reduced to as low as 11% per year (the BAV Note), such interest rate reductions based on the achievement of certain milestones with respect to signing new merchant customer applications. The BAV Note is secured by current residuals and may be prepaid by the company anytime during the first twelve months, subject to minimum prepayment penalties. In connection with the sale of the monthly residuals and the issuance of the BAV Note, Securus entered into an ISO agreement whereby it agreed to sign new customers for merchant processing services with an affiliate of BlueAcre. The ability of the company to receive the additional payments and interest rate reductions are tied to certain minimum performance criteria under the ISO agreement.
Excel’s new CEO and President, T. A. Kip Hyde, Jr., stated, “When our new CFO, Bob Winspear and I joined Excel in mid-May, we recognized that our first priority was the restructuring and repurchase of the merchant portfolio residual base previously sold to E-Cig Ventures by our Securus subsidiary. After evaluating multiple offers, the unique hybrid residual sale and term loan financing structure provided to us by BlueAcre Ventures was clearly the most financially beneficial transaction for the Company, maximizing both the initial cash payment and retention of our most valuable current asset, Securus’ merchant portfolio. In addition, BlueAcre’s processing affiliate, BlueSquare Resolutions brings a number of new sales tools and strategic benefits, unavailable from our other bidders. Completing this series of transactions was a team effort, and sets a firmer financial foundation for the Company to continue growing. We look forward to growing our merchant sales and leasing business with both our current primary partner, First Data Merchant Services, and new partner, BlueSquare Resolutions.”
NYC-headquartered Excel, through its recently acquired wholly owned subsidiary, Payprotec Oregon, dba Securus Payments, is a single-source provider for all types of merchant payment processing needs.