Foreign exchange company Travelex agreed to a deal that will see its lenders take full control of the business in return for a debt restructuring and an £84 million (Dh386.8m/US$105.3m) cash injection.
The UK-based company, which was owned by BR Shetty’s Finablr Group, said the deal would also see its debt reduced by 84 per cent as €360m (Dh1.49 billion) worth of senior secured notes would be converted into equity.
The restructuring will see the company split into two businesses – an Initial FundCo arm focused on servicing the wholesale foreign exchange market and an Optional FundCo business focused on its UK and European retail markets.
“The restructuring will provide Travelex with a stable platform through £84m of new liquidity and a substantial debt reduction, so that it can rebuild revenues under the stewardship of its new shareholders,” said Travelex’s chief executive, Tony D’Souza.
Travelex has suffered problems in recent months, starting with a cyber attack that took down many of its systems on New Year’s Eve.
That was accompanied by liquidity constraints caused by the collapse into administration of Mr Shetty’s NMC Health business, and the Covid-19 pandemic, which took away much of its customer base at airports.
The company was facing a "near-term liquidity shortfall" that put it at risk of a default and put itself up for sale in April.
But it said last month that none of the offers received for the business had been deemed suitable by its creditors.
The restructuring was approved by more than two thirds of the company’s senior secured noteholders.
The IFC business will contain Travelex’s wholesale and outsourcing arms, and its retail businesses in the Middle East and Turkey, Asia Pacific, Nigeria and Brazil.
The OFC business will contain its UK, European and North American retail arms.
About £15m in bridge financing has already been provided to Travelex before its restructuring, which is expected to take place next month, the company told investors.
“I want to thank again all of Travelex's employees who have continued to work tirelessly through this challenging period," Mr D'Souza said.
"I am also grateful to our secured lenders and all of our stakeholders for their continued support as we reach this milestone and look forward to the successful completion of the transaction."
Travelex also reported first-quarter results for 2020, which showed the scale of its liquidity challenge.
Revenue fell 36 per cent to £111.9m in the first quarter as it reported a £42.4m loss on earnings before interest, tax, depreciation and amortisation.
Cash outflows meant its net debt rose to £331.9m by March 31, up from £214.1m three months earlier.
Travelex was bought by BR Shetty for £1bn in 2014.
It was a key part of his Finablr group of foreign exchange and digital payments companies that listed on the London Stock Exchange in May 2019, in a deal that valued the group at £1.23bn.
But the group reported liquidity problems that led to the UAE Central Bank stepping in to oversee operations at its UAE Exchange business in March.
By the time its shares were suspended on March 16 its value had fallen to £77.2m.
In May, the company told the London Stock Exchange that its debt was $1bn higher than the previously reported $334.1m.
Updated: July 8, 2020 12:21 AM